Mark Thoma reports that Paul Krugman writes,

the rise of medical technology … makes … medicine … in which doctors call for every procedure that might be of medical benefit, increasingly expensive.

This is the position that I arrived at in my research on health care costs. That is, our health care spending is high because of the expenses involved in diagnosis and treatment, as we throw more technology (and also more specialists) at the problem.Krugman continues,

So if costs are to be controlled, someone has to act as a referee on doctors’ medical decisions. During the 1990’s it seemed, briefly, as if private H.M.O.’s could play that role. But then there was a public backlash. It turns out that even in America, with its faith in the free market, people don’t trust for-profit corporations to make decisions about their health.

The point about public backlash against HMO’s is correct. However, I disagree with the suggestion that the American people resent health care rationing only when it is undertaken by the private sector. I suspect that the Americans who resent HMO’s that hold down costs by denying potentially beneficial health care would be no happier with government doing the same thing.

An alternative, as Krugman points out, is to reduce the degree of insulation that consumers enjoy from health care costs. This would put consumers in the position of rationing their own health care. He criticizes this approach.

it’s neither fair nor realistic to expect ordinary citizens to have enough medical expertise to make life-or-death decisions about their own treatment. A well-known experiment … carried out by the RAND Corporation… found that when individuals pay a higher share of medical costs out of pocket, they cut back on necessary as well as unnecessary health spending.

This raises the question of what (or who) determines what is a necessary medical service. One could argue that if I choose to forego a medical service, then by definition that service is unnecessary for me.

Overall, although I disagree with Krugman’s bias against the private sector and individual decision-making, I think that his latest column frames the issue much accurately than some of his previous efforts. Health care spending rises as expensive new forms of medical care are made available. To address this, we can either choose government rationing of health care services or a health care financing system under which individuals pay for a larger share of health care services out of pocket. Either approach would require a significant cultural shift from our current practice.