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The Trilemma of Healthcare Economics

Posted by erweinstein on August 9, 2007

In this excellent post, Arnold Kling links to David Leonhardt’s New York Times column about preventative medicine and healthcare cost savings. Leonhardt quotes MIT healthcare economist Jonathan Gruber, who questions whether preventative care can create net savings in healthcare expenditures (as Hilary Clinton has implied). Kling also discusses what Michael Cannon calls “Kling’s Iron Trilemma” of health care spending. Kling explains,

We want:

–what I call insulation, where consumers enjoy the peace of mind of having their medical services paid for by a third party;

–unrestricted access, where consumers and doctors can choose medical procedures without bureaucratic interference or government budget limits;

–less stress over rising health care costs.

The trilemma is that we can have at most two out of three. Much of the “reality-based community” (an Orwellian label if there ever was one) denies that the trilemma exists. Gruber does not deny its existence, but he prefers restricting access to reducing insulation. I prefer the latter.

For reference, Kling received his Ph.D. in Economics from MIT and serves as an adjunct professor at George Mason University. He writes the blog EconLog (jointly with Bryan Caplan), and his most recent book, Crisis of Abundance, is about US healthcare reform.

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