Bernanke, Orszag, and Kling on Health Care
By Arnold Kling
Ben Bernanke, who I think of as center-right, says,
Per capita health-care spending in the United States has increased at a faster rate than per capita income for a number of decades. Should that trend continue, as many economists predict it will, the share of income devoted to paying for health care will rise relentlessly. A piece of wisdom attributed to the economist Herbert Stein holds that if something cannot go on forever, it will stop.
…From the economist’s perspective, the question of whether we are spending too much on health care cannot ultimately be answered by looking at total expenditures relative to GDP or the federal budget. Rather, the question, whatever we spend, is whether we are getting our money’s worth. In general, good information and appropriate incentives are necessary to allocate resources efficiently. In health care, the necessary information should include not only the clinical effectiveness of certain tests or courses of treatment but also their cost-effectiveness. As the regional comparison of health-care costs illustrates, cost-effective approaches may be at least as useful as more costly approaches in delivering good health outcomes.
Peter Orszag, who I think of as center-left, says,
The single most important factor influencing the federal government’s long-term fiscal balance is the rate of growth in health care costs, caused largely by rising health care costs per beneficiary.
…Providing more information on the “comparative effectiveness” of alternative medical treatments, and changing financial incentives that encourage providers to engage in expensive treatments and procedures may help shift professional norms to improve efficiency and restrain cost growth.
I find it difficult to discern a difference between the two. It would be hard to discern a difference with the first half (“diagnosis”) of my book, Crisis of Abundance. That is the part that Jason Furman praised in a forum two years ago. Furman, who was recently named economic policy director for the Obama campaign, proceeded in the forum to condemn the second half of my book–its policy prescriptions.
The point is that economists are in fairly broad agreement that health care policy is unsustainable and that cost-effectiveness needs to be brought into the picture. My view is that the way to do that is to give consumers the means, the motive, and the opportunity to make decisions based on cost-effectiveness. Other economists tend to see a larger role for government in determining cost-effectiveness.