I’m looking forward to my week of co-blogging over here. I thought I’d start by pointing out how Angry Bear beat the NY Times yesterday. Kash wrote that
the pause in the rise of the cost of health insurance in the mid 1990s…was due to the one-time transformation of the majority of health insurance plans to cheaper HMOs. That approach to solving the rising cost of health care has now run its course.
I think it’s fair to describe this explanation as the conventional wisdom among anyone with a little knowledge about health economics. HMOs are cheaper, so when consumers switch to them, health costs grow more slowly. But by now, there aren’t that many people left in traditional insurance plans: there’s no one left to switch. And while HMOs are cheaper, their costs generally rise just as rapidly as those of traditional insurance, because they’re driven by the same underlying forces (primarily technical change).
Compare Kash’s post to the Times’ analysis:
The increase in health insurance premiums reflects the rising cost of health care, which is being driven by expensive new drugs, many of them heavily advertised to consumers; medical advances including diagnostic tests that require costly new machines; and a reaction to past restrictions in managed care health plans that sought to rein in costs.
The Times isn’t wrong, exactly, they’re just missing a big and obvious part of the story. For that, you have to go to the blogosphere.