In the third 2004 presidential election debate, President George W. Bush was asked why health-care costs were going up so quickly. He replied that “there's a systemic problem. Health-care costs are on the rise because the consumers are not involved in the decision-making process. Most health care costs are covered by third parties. And therefore the actual user of health care is not the purchaser of health care” (transcript downloaded from http://www.debates.org/pages/trans2004d.html).

He thereby pithily summarized the policy presumptions of one side of the great American health-care finance debate. As Tim Jost shows in Health Care At Risk, this analysis has been elaborated over time in both academic economics and less formal policy literature, and developed into a series of policy proposals such as Health Savings Accounts. The result is not precisely a social movement, but it is certainly a vibrant and powerful advocacy coalition, consisting of market-oriented advocacy organizations, prominent university-based academics, political entrepreneurs, and some supportive interest groups. All argue that, in essence, health-care costs are too high because individuals do not face a price constraint at the point of service. They have named their policy proposals “consumer-driven health care,” with the presumptions being both that having to think about costs, as opposed to not having to think about costs, puts you in the driver's seat, and that consumers can have the information needed to choose on their own behalf.

The book is a highly critical evaluation of the premises and conclusions of this analysis. The problem with insurance is also the point of insurance: to protect people against having to worry about the costs of medical care. Chapter 1 therefore explains both the reasons for insurance and the problems with the current American health-care system, in as fine a primer on health-care finance as I have ever seen. Chapters 2 and 3 then describe the key elements of and arguments for the current conservative proposals, high-deductible insurance accompanied by tax-preferred health savings accounts (HSAs).

The middle four chapters assess the logic of the arguments and some historical evidence. Jost begins by looking at the American health-care system before the broad extension of insurance in order to show why insurance was desired. Not only conservative advocates but also many other health economists and policy analysts have accepted a claim that the current employer-based system is based on accidents of World War II wage-price policy and Internal Revenue Service (IRS) determinations and so, implicitly, a bad idea. He provides a devastating critique of the conventional wisdom, showing why the world without insurance caused people to seek insurance and also that the wage-price and IRS decisions had little effect on the growth of employment-based insurance. He provides an almost equally useful history of the role of consumer cost sharing within American health insurance and the growth of other attempts at cost control, particularly “managed care.” He then turns from the world of practice to the world of evaluation, tracing the evolution of ideas about health-care insurance and costs within the economics profession, and the underlying flaws in the neoclassical view as applied to health care. This section also could be a primer in a health policy course.

The text then addresses the particular versions of market-oriented reform that are being promoted today. Chapter 8 is careful, thorough, and not determinative, simply because there is not much evidence yet about the performance of the combination of high-deductible insurance and tax-favored savings accounts. This includes both the implications of the famed Rand Health Insurance Experiment (HIE), and recent experience with high-deductible plans. The problems with the HIE include that it was too small to provoke provider response, that the evidence about effects could be interpreted in different directions according to one's values, and that it was performed within a different health-care world than we have now, 30 years later. The problems with recent experience include that there is not much, that there are reasons to believe it is not representative, that some key information is proprietary, and that the evidence we have appears to be mixed. The following chapter then assesses the legal, ethical, and regulatory thicket that ought to be associated with high-deductible plans but has yet to be fully explored.

The book concludes by building on some of the earlier analysis and adding a report on what other countries do, so as to elaborate the other side of the health-care policy divide: why the Democrats, essentially, believe that something more like what other countries do could provide lower costs, better access, and at least comparable quality. Again, one could hardly find a more concise account both about practice and about why the standard right-wing criticisms are flawed. The author's own policy proposal is unusual but is especially impressive because it is based in the analysis of insurance with which he began, and carefully parses what could best be paid by individuals, best be paid by government, and best covered by group insurance.

Health Care at Risk should be of great interest to two groups of readers. Anyone who teaches health policy and politics should read it for its arguments about history and economics and its account of current ideas, and I suspect many who read it will consider adopting it for their courses. This book is a superb introduction to a large part of health policy. Yet it should be read more widely because it is the best work I have seen about one of the basic policy conflicts in American politics today. All of the Republican candidates for the nomination took positions in line with “consumer-directed” theory. Every Democrat had proposals much closer to Jost's. Anyone who wants to understand the stakes in the 2008 election should read this book.