Money to burn.

Crisis of Abundance By Arnold King Cato Institute US$16.95

One of the biggest budget headaches facing the United States--both government and individuals--is the cost of medical care. Medical insurance today costs 50% more today than it did in 1975. What happened in these 30 years? Arnold Kling a former economist of the U.S. Federal Reserve and for Freddie Mac, the second-largest mortgage bank in the nation, examined the issue and comes up with an unexpected solution.

First, Kling notes, consider the scientific advances and changes in technological resources in modern medicine. In 1975, computerized axial tomography--commonly known as an MRI scan--did not exist; in 2005, more than 24 million were done, costing several hundred U.S. dollars each. Eye operations using lasers, colonoscopies and other surgical advancements did not exist three decades ago. These innovations have raised the cost of care. Today, medical providers use both more physical assets, such as equipment, and human resources, specialists for instance, than ever. If there is crisis in the U.S. medical system, he argues, it is a crisis of abundance.

Meanwhile, under the administration of U.S. President George W. Bush alone, the

number of people without medical insurance in the United States has increased to 45 million and counting, approximately 15% of the population. There are several reasons why. High unemployment during the first years of the Bush administration meant some workers lost coverage. The rising cost of insurance made it prohibitive for many others. And the elimination of employer-backed insurance, especially among small businesses, has hurt.

As might be expected, the result has been a rising clamor for government-subsidized medical care such as that enjoyed in many industrialized countries, with the exception of the United States. Yet Kling is headed in the opposite direction. Instead of asking for greater state intervention in the medical-services delivery, the author advocates for more emphasis on private savings, and for more market innovation. He proposes to cut the government's responsibility for healthcare expenses to 13% from 40% while boosing out-of-pocket individual payments to 56% from 19% now. Kling argument is very simple: "The very poor and the very sick need help paying for health care. The rest of us do not."

The author claims that such a change in the healthcare system would be perfectly manageable because it would decrease government spending. Its impact on individuals' finances would be absorbed by individual savings accounts, similar to a plan long backed by Bush. The government would finance health care for people living beneath the poverty level. Private insurance would cover the disastrous illnesses and attendant expense that often take place at the end of life. In both cases, Kling writes, the financial weight for both health systems--a public and a private one--would be much less burdensome than the present situation. Bureaucracy. Kling believes that the government not only does not have a solution for this "crisis of abundance" but is in fact part of the problem. A good amount of tax collection goes to sponsor health care for wealthy individuals instead of concentrating on the poor. At the same time, he observes, policies that encourage employer-offered insurance instead of individual private insurance pushed up the cost of health care and has lead instead to expensive bureaucracy.

This book does not get into great detail about the structure and the operation of an ideal healthcare system. Instead, it focuses on a course of action and some general guidelines on the basis of private initiative. Although the emphasis in helping the poorest is commendable, putting the economic load of the medical care on consumers' shoulders is not likely to get much traction, especially in an era in which insurance companies seem increasingly bent on hitting the pocket-books of individuals.