The Health Care Mess: A Brief History

Do you regularly read the Marginal Revolution blog? If you care much about actual economics, and especially if you are a student of the same (either literally or figuratively), you would be wise to do so. This typically excellent post offers a brief review of a book called Money-Driven Medicine, by Maggie Mahar, whose argument Tyler Cowen summarizes thusly:

I interpret the basic story as this: the American health care cost spiral comes from suppliers and their entrepreneurial abilities to market expensive and highly specialized services of dubious medical efficacy. Medical care starts off as ambiguous in value and hard to measure in quality. Customers are cowed by doctors and other family members into accepting or even demanding what is offered to them. Third-party payments make the problem worse, and government intervention has stoked rather than checked the basic dynamic. You end up with massive expenses, lots of stupidity, and — because of its expense — radically incomplete coverage. Every now and then the extra services do pay off, but not frequently enough to boost American stats on health care quality.

Cowen calls the book “the most coherent, supportable, and fleshed out anti-market story I’ve seen,” while acknowledging that it does not dovetail precisely with his own view. (FWIW, here is another interesting and longer review of the same book.) Regardless, Cowen’s brief review is studded with points that we all recognize (“massive expenses, lots of stupidity, and — because of its expense — radically incomplete coverage,” e.g.), and which, to my mind, crystallizes what many, many smart people have been thinking about health care for the past 10 or 20 years. The comments are also very informative, including a long and thoughtful response from Maggie Mahar.