health insurance and effect on increased health care costs

[Martha]

In this weeks Business Week there is a short article on health costs and the possible effect insurance has had on health care costs. http://www.businessweek.com/magazine...tm?chan=search

After studying data going back to the 1960s, Amy N. Finkelstein has concluded that the real culprit for the rapidly rising cost of health care is the massive expansion of medical insurance over the past 40 years. Sure, new technologies play a role, but doctors, hospitals, and consumers adopt them so freely largely because insurance foots the bill. "Where does that technological change come from?" asks Finkelstein, 32, who lives in Cambridge, Mass., with her economist husband, Ben Olken. "I am trying to get inside that black box."

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Finkelstein's breakthrough confirms a theory first advanced almost 30 years ago by Harvard economist Martin Feldstein. At the time he didn't have detailed health-cost data to prove his case. Then in 1987 a massive Rand Corp. study concluded that technology accounted for more than half of the rise in health-care costs. Insurance, Rand figured, increased costs by just 10%.

So Feldstein's theory gathered dust until Finkelstein discovered the proof by sifting through long-forgotten paper records in MIT's library. There, she found that hospital spending soared after the federal Medicare program began in 1966



Finkelstein doesn’t draw any conclusions as to whether this is bad or good.* If quality of care has improved or more people get care than did before insurance expanded, then it is a net positive.* However, it is something to think about when trying to get our arms around health care distribution in the US.* For example, in my town there are two major hospitals.* Each has a helicopter.* Each has an MRI machine.* Etc.* Is this efficient?* If there was a single payor rather than insurers funding care, maybe some of these inefficiences could disappear.*

The article states that her theory could "spur the drive for evidence- based medicene."


The article* also states that "if individuals have to pay more for their care through high-deducible health plans, they may cut spending."* Yes, maybe so, but is that positive?* Will people go without necessary care.* Without necessary drugs?* * Also, I don't think individuals are in much of a position to go shopping for the best care and the best price.*