Finkelstein on Health Insurance

Amy Finkelstein, one of the young stars of the economics profession, writes:

the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period.

If correct, this conclusion requires a radical revision in the conventional wisdom among economists. The conventional wisdom holds that technological advance is the primary cause of increasing health spending: We now have new and better ways to spend money to save and improve lives.

Finkelstein refrains from normative policy analysis in the article I've linked to above. But if health insurance, rather than exogenous technological advance, is the explanation for higher health spending, the policy implications could be profound. Better designed health insurance could, perhaps, save us a bundle of money.

See Businessweek for more on the topic.