Amy Finkelstein, Matthew Gentzkow, and Heidi Williams write,

Our findings confirm that supply-side factors are important, while also revealing that patient preferences and health status together account for a large share of variation. Once we address the endogenous measurement issue with patient health, we find that roughly a quarter of the geographic variation in log health care utilization can potentially be attributed to observable patient health. Whether the remaining patient component reflects preferences or unmeasured health remains an open question

Pointer from Alex Tabarrok, who suggests that the supply-driven variation represents an upper bound (a high one) of sorts on inefficient use of medical procedures. I disagree. There also can be demand for medical services with high costs and low benefits, fueled by third-party payments.

I continue to believe what wrote a decade ago in Crisis of Abundance. That is, the fundamental reason that health care spending is very high in this country is that we obtain a lot of medical services that have high costs and low benefits. You can address that either with top-down rationing or with having patients face a larger share of the costs and being forced to make choices.

CNN reports on the way that my own Obamacare expenses (my premiums plus deductible for next year will be close to 40 percent of my 2015 adjusted gross income) are not unusual.

“These costs are largely a symptom of the fact that medical costs in this country are extraordinarily high,” said Kevin Counihan, CEO of the federal exchange, healthcare.gov. “We have an 800-lb gorilla here, which is exploding health care costs.”

1. Regardless of what economic theory suggests about health care policy, the political system is heavily biased toward stimulating demand while restricting supply. For example, Obamacare stimulated the demand for health insurance through a combination of mandates and subsidies, and yet it restricted supply in that it gave consumers fewer choices. Hence, the “exploding health care costs.”

However, this political bias has operated much more broadly and for much longer. Medicare and Medicaid stimulated demand, while supply has been tightened by restrictions on medical licensing, practice regulation, and regulatory limits on hospital construction.

The most economically beneficial reforms of health care would run counter to this political bias. That is, they would serve to increase supply and cut back on the stimulus to demand. Of course, such reforms are not going to be popular politically.

2. The hope that a single-payer system will reduce costs is misplaced. Compared to what many major industrial countries spend on health care, we spend a higher proportion of our GDP on Medicare alone. [UPDATE: a commenter pointed out that I need to include Medicaid. In fact, I also need to include government employee benefits. See the table from the OECD which is found in this piece by Megan McArdle. As I pointed out ten years ago in Crisis of Abundance, our high spending reflects a willingness to undertake a lot of medical procedures with high costs and low benefits.

3. As individuals, each of us would like unlimited access to medical services without having to pay for them. Collectively, we cannot afford this, because it leads to over-utilization and waste. As our rate of health care spending becomes unsustainable, we are going to get a combination of third-party rationing (denial of coverage for some medical services in some situations) and self-rationing (insured individuals facing higher deductibles and co-pays will choose not to obtain some medical services). If the left has political control over health care policy over the next ten years, I expect to see more third-party rationing. If the right has political control over health care policy over the next ten years, I expect to see more self-rationing.

4. A two-tier health care system is all but unavoidable. If the government provides basic health care for all, then the rich will go outside the system for expensive procedures. For example, Canadians can come to this country for treatments that they cannot obtain in Canada. If the government limits its involvement to providing health care vouchers to poor people, then they will not be able to afford the services that the rich are able to obtain.

5. New discoveries in health care tend to make existing programs and policies anachronistic. The FDA is often a roadblock to innovation. Medicare and Social Security have not adapted to greater longevity. Incentives for innovation are too dependent on the patent system, as opposed to prizes or other methods. New forms of health insurance, such as “insurance against becoming uninsurable,” need to be tested in the market.

Yesterday in the mail, my wife and I got our premium notice from the health care exchange. Our monthly premium is going up 70 percent, and our deductible is going up also.

I wonder if any of the pundits who claim that Obamacare is working are actually getting their health insurance through an exchange.

I wonder how many of us who have not supported Donald Trump are feeling mugged by reality.

Jeffrey H. Anderson writes,

According to the Centers for Disease Control and Prevention (see table 1.2b), 66.8 percent of those living in the United States had private health insurance in 2007. Now, as of 2015 (the most recent year for which figures are available), only 65.6 percent of those living in the United States have private health insurance.

…Meanwhile, the CDC figures show that the percentage of people living in the United States who have public health coverage has risen dramatically, from 18.1 percent in 2007 to 25.3 percent in 2015 (see table 1.2a).

I was wondering how much of this reflects people aging into Medicare, but then I clicked on the link to the report and the tables are for Americans under 65. My guess is that future health care reforms (“fixing Obamacare”) will move us further in that direction.

Liran Einav, Amy Finkelstein, and Atul Gupta write

we document four similarities between American human healthcare spending and American pet healthcare spending: (i) rapid growth in spending as a share of GDP over the last two decades; (ii) a strong income-spending gradient; (iii) rapid growth in the employment of healthcare providers; and (iv) a similar propensity for high spending at the end of life in pets and humans.

Their findings are inconsistent with the view that our high spending on health care is driven by third-party payments or supply regulations. The findings are not inconsistent with what I suggested a decade ago in Crisis of Abundance, which is that medical treatment uses human and physical capital increasingly intensively. Also, they are not inconsistent with Robin Hanson’s view that medical treatment is something that we want others to get in order to show that we care.

Reed Abelson and Margot Sanger-Katz (NYT, the Upshot) write,

Competition, at least in theory, helps keep premiums low and service high. That’s the whole point of having a market for health insurance. But 17 percent of people eligible for this market might have no choice of carrier next year.

…People who do not receive federal tax credits to help pay for their coverage are particularly hard hit by having to pay higher premiums and could be unable to afford the cost. They are a small minority of people currently in the Obamacare marketplaces, but more than a third of all people buying their own insurance, according to recent estimates.

…There are currently about half as many people in the exchanges as the Congressional Budget Office expected…. About 27 million Americans still don’t have insurance

Read the whole thing. My prediction is that in order to keep the system going under the Clinton Administration, much more taxpayer money will be spent and consumers and health care providers will face more coercive rules.