Crisis of Abundance is now in paperback, for ten bucks at Amazon. The fact that Peter Orszag, no ideological fellow-traveler of mine, sounds many similar themes indicates to me that I can feel justifiably proud of the book.

Two changes from the hardback edition:

1. The NFIB’s Bob Graboyes came up with a better graphical scheme for presenting my proposed reforms.

2. I wrote a preface, which I will proceed to excerpt.

I thought I would step back and describe how my thinking evolved before, during, and after writing the book.

I started thinking about health care by focusing on a well-known puzzle. Over the past thirty years, the U.S. has increased its health care spending dramatically relative to other countries, but without gaining on other countries in terms of longevity. We have tried a “surge” in medical spending, if you will, and the surge does not appear to be working.

I started out by looking for evidence that the surge is working. Longevity statistics today are heavily influenced by people born in the 1930’s. Perhaps those of us born after 1950 have received more benefits from the surge, and these benefits will show up later. But I did not find any convincing signs of this.

Instead, I came across considerable evidence that suggests that more health care does not necessarily lead to better health. Many studies of comparable populations within the United States receiving different levels of medical services show no difference in outcomes. I interpret this evidence as showing that Americans make extravagant use of medical procedures with high costs and low benefits.

The main empirical finding of the book is that the surge reflects an increase in the use of specialists and high-tech medical equipment. A disturbing fact is that many procedures, such as getting an MRI and an orthopaedic consult for a back injury, are neither absolutely necessary not absolutely unnecessary. Such procedures instead fall into a gray area, where cost-effectiveness is difficult to determine yet important to take into account.

The second half of the book offers suggestions for health care reforms that would give consumers the means and the motive to weigh costs and benefits more carefully. I recommend a “medical guidelines commission” to rigorously study common medical procedures from a statistical and economic standpoint. I recommend health insurance policies with higher deductibles, in order to give consumers more of an incentive to focus on cost-effectiveness.

So far, the first half of the book has been better received than the second half. Many health policy experts across the ideological spectrum accept the diagnosis. But, apart from the “medical guidelines commission,” my suggestions for a cure have drawn less support.

This reception, which was not a surprise, has led me to think harder about the values and beliefs that Americans have about health care. Our values and beliefs make health care reform difficult. After all, neither those who favor a single-payer health care system nor those of us who prefer much less government in health care are making much headway. The status quo, even though not sustainable, remains attractive.

As I point out in the chapter “no perfect health care system,” we want our health care system to have three characteristics: unfettered access to medical services (no rationing or supply constraints); personal insulation from health care costs (paying for medical services through insurance rather than out of pocket); and economic efficiency (cost-effective, sustainable health care finance). At most, we can have two of these three features.

Why is there push-back against proposals to move toward economic efficiency? First, I think that there is a lot of natural resistance to thinking about health care in terms of costs and benefits. We find it somewhat repulsive to bring the topic of money into a discussion of a personal service related to our bodies. We like to speak of the gift of healing, not the business of healing.

Moreover, we are reluctant to think in terms of uncertainty, ambiguity, and probability. Instead, we wish to think of health care in black-and-white terms, as either necessary or unnecessary. If you don’t need it, then you don’t get it. And if you need it, there is no interest in doing a cost-benefit calculation.

The truth is that there is a large gray area (think again of the MRI after a back injury), where procedures are neither absolutely necessary nor absolutely unnecessary. There is no escaping that somebody has to make a difficult decision in these gray-area cases.

As it stands today, Americans’ values and beliefs tilt the decision in the direction of undertaking more health care procedures. We want to see our ailments tackled immediately, rather than waiting. We want the doctor to be sure to get the diagnosis right, rather than simply going on superficial evidence.

We never give up. If I cannot do as much with my shoulder as I could when I was 25, then there has to be a way to fix it. If someone has a seemingly fatal illness, then there must be a doctor with a cure.

Our medical system has come to reflect these values and beliefs. In many ways, such values are admirable. However, real health care reform, aimed at obtaining a reasonable balance between costs and benefits, may require confronting and changing some of these values. Keep that in mind as you read the second half of the book.