Over the years a belief has become current among people who have pretensions to seriousness in the health policy debate: The main problem with health care in the United States is cost and, if we can only lower the costs of health care then insurance we become affordable and all of our other problems will be solved.

We are told that we demand Cadillac health care - to quote a comment to this blog. Usually it is suggested that our demands on the system are excessive because our out of pocket expenses are low - someone else will foot the bill. Even if it seems like the right thing to do, universal coverage will only lead to more profligate consumption of health care making the problem even worse.

And this assertion does have some foundation in economic theory. We generally believe that lower prices - as perceived by the consumer - lead to more consumption. If you were to find someone's all day ride pass at the county fair, you would go on a whole lot of rides. If a health plan offers free prescriptions for Viagra - that should get me a few hits - its expenditures on Viagra will rise.

This assumes, however, that the services being consumed are inherently rewarding. Which assertion Wonks Anonymous would question, noting that although many medical procedures involve nausea they have no other resemblance to carnival rides. Speaking for himself, Wonks Anonymous would just as soon avoid medical care when he is not really ill.

Now of course others may feel differently and it is useful to consider just how medical spending is distributed. Here a study by the Henry J Kaiser Family Foundation provides some insight: In 2004 almost 50% of total health care spending was concentrated in the top 5% of health care consumers. The expenditure for these consumers was over $13,387 per year.

Which is not just a lot of doctors office visits - that would be over 130 per year - and the odd prescription for Cialis. We are talking about serious episodes of illness or injury or major chronic conditions. We are probably talking about a hospitalization or an emergency room visit. We are talking about situations in which consumers are unlikely to consider price, even if they are paying the whole bill.

Almost half of our health care spending is devoted to very sick people. This is Cadillac health care. It uses the most advanced technology and its results are often disappointing but sometimes miraculous. If we are serious about reducing our health care costs we will have to devote some attention to this segment of spending.

Wonks Anonymous does not feel that the market will do us much good here.  Despite what Gary Becker's human capital models might predict, high out of pocket expenditures have had no impact on automobile accidents, heart attacks and chronic illness. If high out of pocket expenditures do not encourage people to be healthy - or to acquire healthy genes - then the only way they will work to reduce our medical spending is by rationing medical care. Those who can afford it will get care. Those who cannot will have to fend for themselves.

Which is to say that we will have a two tier medical system, very like the system to be found in India or China or any number of glorious international competitors. People with large amounts of money will get chemotherapy, transplants, dialysis, open heart surgery and so on. The rest of us will be able to check ourselves into charitable institutions where earnest volunteers will help to ease our passing from the scene - out of the sight of our betters. I an sure that Mother Teresa's religious order will be glad to expand to the US.

Of course we will need to repeal EMTALA so that hospitals can play their role in the new market and turn away the poor.