Krugman decides that we should go towards the Canadian system (despite the many problems often highlighted in this blog). He does frame the issue fairly though.
In most advanced countries, the government provides everyone with health insurance. In America, however, the government offers insurance only if you’re elderly (Medicare) or poor (Medicaid). Otherwise, you’re expected to get private health insurance, usually through your job. But insurance premiums are exploding, and the system of employment-linked insurance is falling apart.
Some employers have dropped their health plans. Others have maintained benefits for current workers, but are finding ways to avoid paying benefits to new hires – for example, by using temporary workers. And some businesses, while continuing to provide health benefits, are refusing to hire more workers.
In other words, rising health care costs aren’t just causing a rapid rise in the ranks of the uninsured (confirmed by yesterday’s Census Bureau report); they’re also, because of their link to employment, a major reason why this economic recovery has generated fewer jobs than any previous economic expansion.
Clearly, health care reform is an urgent social and economic issue. But who has the right answer?
The 2004 Economic Report of the President told us what George Bush’s economists think, though we’re unlikely to hear anything as blunt at next week’s convention. According to the report, health costs are too high because people have too much insurance and purchase too much medical care. What we need, then, are policies, like tax-advantaged health savings accounts tied to plans with high deductibles, that induce people to pay more of their medical expenses out of pocket. (Cynics would say that this is just a rationale for yet another tax shelter for the wealthy, but the economists who wrote the report are probably sincere.)
John Kerry’s economic advisers have a very different analysis: they believe that health costs are too high because private insurance companies have excessive overhead, mainly because they are trying to avoid covering high-risk patients. What we need, according to this view, is for the government to assume more of the risk, for example by picking up catastrophic health costs, thereby reducing the incentive for socially wasteful spending, and making employment-based insurance easier to get.
A smart economist can come up with theoretical justifications for either argument. The evidence suggests, however, that the Kerry position is much closer to the truth.
I often blog about the necessity of connecting the health care consumer (the patient) to the cost decision. We can decrease costs only if patients really want us to do that.
Moving to Health Savings Accounts would decrease overhead. Having insurance companies less involved is a desirable outcome. I believe that having the government more involved is an undesirable outcome.
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22 Responses to Krugman on health insurance
arf
August 29th, 2004 at 7:30 pm
oh wow
Krugman weighs in on health care.
Why don’t you throw in Ira Magaziner as well?
Evan
August 29th, 2004 at 8:26 pm
What’s the goal of a health-care system?
Really, I would like to know what the people on this blog think is the goal of having one.
chris
August 29th, 2004 at 10:07 pm
Evan:
The goal of a health care system is to tend to the health needs of the community. However, health care systems do not operate on goodwill alone. The greatest problem is providing health care at an affordable price.
You might be falling victim to the “health care is a right” illusion, or you don’t grasp the idea of economics — whichever it is, what is your supposed goal of the health care system?
Evan
August 30th, 2004 at 1:20 am
Chris,
I completely agree with you that the goal of a health care system should be to deliver health care to the community it serves.
So if the goal of a health care system is indeed to tend to the health needs of the community … why does ours not include the whole community? Can you explain why that should be?
It seems like there are many ways to stay within your set of parameters (knowledge of economics and need to not give it away for free) and still make it available to the whole community.
As a side item — what do you think of the military’s medical system?
Jared
August 30th, 2004 at 7:51 am
Has anyone ever asked George Bush whether he views health insurance (or all Republicans) as a carrot to get people to work?
I must be in a cynical mood this morning, because it seems that some policy decisions favoring our current healthcare/healthcare insurance system are designed with this as a central tenet.
RGL
August 30th, 2004 at 8:03 am
A recent analysis of the Kerry health plan declared it as far worse than that designed by Ira Magaziner for Hillary Clinton in 1992.
It has all the elements of the Canadian system, with the same bureaucracy, the same inefficiencies, the long waiting periods to see doctors,and the astounding costs that would bankrupt this country in no time. Is this what we want?
Oh yes, it is based on the same illusion that health care is a right to be dispensed to everybody, never mind the costs.
We need to be careful about what we want – or we may get it.
chris
August 30th, 2004 at 2:20 pm
Thats the inherent problem with pandering to the “health care is a right” crowd. It seems like a noble idea and everything, but it is just not feasible. Plain and simple: not feasible, not logical, not a good idea. Canada is the perfect example. Their health care system embraces all these noble ideas, and it is a complete flop. They recently had to pass legislation fining physicians and patients $20,000 for health care outside of the national network. You don’t have choices in a system like that. Over 35 and need a new liver: SOL in the national network, or pay an additional 40k as well as criminal charges for getting a new liver outside the national network.
I have said before that I believe the system should provide a low-level net of guaranteed support to all Americans concerning public health issues (vaccines, flu shots, education about health), but that the patient should be responsible for anything else. We have to draw a line somewhere, else we end up like Canada.
Health care advances are great, but just because they exist does not mean everyone is entitled to them. Should the government (taxpayers) be forced to shoulder the burden of $50,000 treatments? When the government decides it can only spend $X per year on health care, rationing ensues. What happened to providing for the health needs of the community? “Sorry, looks like you’ll have to wait 9 months for that hip replacement ma’am.”"Sorry, the government says that you’re over 35 and we can’t give you a kidney transplant, maybe you’ll live long enough to see your son graduate high school.”
Faced with scenarios like this, is it really in the best interests of the patients to switch to a national health care system?
Evan
August 30th, 2004 at 6:37 pm
Chris,
You didn’t really answer any of my questions but that sort of shows where you stand.
So in your ideal health care system, rather than actually offering health care to the whole community, you would offer vaccines and nutritional advice.
In what way does offering those improve the health of a community to a vastly greater degree.
The very idea that offering universal care is somehow impossible is just ludicrous.
Virtually every country in the world that has an economy even 1/3 as strong as ours does it and does it for less money than we spend on our system.
So some facts please. Why is it that we can’t cover everyone? What numerical facts make our health care spending of about 17% of GDP unable to cover everyone.
Why are we able to afford 135 billion dollars annually for a war, but not able to do so for health care?
In fact, it is simply a matter of priorities. You have to know that.
chris
August 30th, 2004 at 10:43 pm
Based on levels of thinking, you’re operating around the 2nd level. Also, you apparently don’t think preventative medicine has any bearing on community health…OK, doesn’t make sense, but OK.
You point out that countries with an economy 1/3 as strong as ours provide health care for free to their citizens. Yes, they do provide universal health care, point not debated. Now, rise up to the 3rd level of thinking, and inspect the health care systems. They are weak, wasteful systems which do not provide as much as you would like to believe. Again, look at Canada. They have a national health care system, its relatively inexpensive compared to ours. But you have to wait 2 months to see a PCP, 4 months to see a specialist, 4 months to undergo surgery, if you’re over 35 you can’t get an organ transplant, etc. etc.
This is the situation you face with nationalized health care: a broken, wholly ineffective system. In free-market systems you can get a hip replacement surgery within weeks. It takes 9 months in systems like Canada’s.
To go over the simple economic theory associated with it: health care costs money. There is no ceiling on how much is spent on health care, it is not something that you can “estimate” and fit into budget. Lets say the government decides to pay for everything. Cost is nothing to the subscriber (citizen) now. Patients go to the doctor for anything, lets say for arguments sake when they have a sore back, “just in case”. Doctors, even knowing its BS, but at the demand of the patient and not wanting to risk lawsuits, order an X-ray. As suspected, everything is ok, its just a pulled muscle, doc prescribes tylenol. The whole scenario was an expensive process, topping $1500. What does the patient care though? They’re not paying for it, the government is! Throw cases like that together, and the health care system triples in its cost the first year alone. (You may dismiss this as an unlikely scenario, but this is quite common. Look at the explosive cost of Medicare over the past 40 years).
So after year one, health care costs have tripled. The nation can’t afford that! You can’t just pass off trillions in expenses to taxpayers. So with their budget, the government is forced to ration the health care system and cut reimbursements to physicians. They become a national HMO, deciding who will go see a doctor, how quickly they can see that doctor, and if the government will pay for that operation they need. Physicians, forced into making 50k a year after 10 years of training, say “screw it” and find work where they can make more money and their talents are appreciated. No student is going to put themselves $200k in debt just to make $50k a year…so you face a shortage in physicians, and the “best and brightest” drop medicine because it is a poor career choice. Ever wonder why theres not a lot of foreign medical schools; why the most innovative medical research is done in the states?
So this is the great illusion of national health care. Sure, you can say the government will pay for everything, but you’re just going to end up with a broken, crappy, health system that patients skip the country to get out of.
The above rant was simplified a bit, as there is much more to expound upon, but I think the general point is made.
Evan
August 31st, 2004 at 12:52 am
Chris, my niece in Canada sees her primary doctor the same day she makes an appointment. What is the source of your data?
If there were a shred of truth to what you are saying, then there would be statistical evidence for it.
Yet we spend 18 cents of every dollar on health care processing paperwork. Is the Australian system so much less efficient than ours?
We aren’t the leader in infant mortality, life expectancy, life expectancy at 20, or any other major health measure.
Our health care system is as good as your ability to access it.
I’ll ask again … do you have a favorable or unfavorable opinion of the military health care system?
chris
August 31st, 2004 at 1:29 am
I am not familiar enough with the military health care system to make an adequate analysis.
Here are some sources for you though:
http://ff.org/centers/ccfsp/pdf/CCSFP-PP-Winter-03.pdf
http://www.medicalpost.com/mpcontent/article.jsp?content=/content/EXTRACT/RAWART/3734/09A.html
This one is a mammoth PDF file:
http://www.fraserinstitute.ca/admin/books/files/wyt.pdf
This list could go on and on, if you need more files, google “canada health care wait times”. Looking at the bleak health care system in Canada, and the fact that the US has about 10 times as many citizens, switching to a national system would spell disaster. Theres even some stats in those pages describing the exodus of over 10k physicians in the 90s, with that rate slowing to about 200-250 physicians/year now. Its irrefutable evidence to what I warn. Switch to a national system: face exorbitant costs, shortage of physicians, and ultimately the waiting times we see in Canada now. It is hardly a health care system to model after.
CHenry
August 31st, 2004 at 7:48 am
I am familiar with the military health care system. It is essentially an HMO, but with fewer, not more choices than civilian HMOs. For one thing, the active duty population is required to use the armed forces medical system for at least some of their care. In locations where specialist referral is not available within the system, administrative officers are empowered to refer the patient to a civilian practitioner for care. In these cases, the service pays !00% of the bill. The service member does not have the right, except in a life/limb/sight threatening emergency to seek initial care outside the military medical system. With dependents, this is different. Their benefits are more akin to a PPO-type HMO system, albeit one with access limited by the relatively low reimbursement that TriCare provides.
Military beneficiaries don’t get to “pick” their doctors; they are assigned based on scheduling availability. If the local administrator decides that it is reasonable to send the member by air to a military medical facility in another city for routine consultation rather than to a local civilian practitioner, then the member is sent to the military facility. For the most part, unless critical defense operations are affected, these decisions are not disputed. If a service member doesn’t prefer this option, the only choice is not to go at all, or to pay for the alternative out of pocket, which never happens.
The military system is really two intersecting systems, three if you consider the VA system as well. It is not at all built around considerations for patient choice or convenience, but around the needs of the service, and cost-containment.
It also operates under the general rules of the military, which means that the service member is greatly under the control and authority of his command, and can be ordered to comply with medical care orders or be subject to administrative or criminal sanctions. The military providers and facilities also enjoy substantial protection from tort liability claims under the Feres doctrine, which essentially immunizes the military practitioner from civilian suits (although there are administrative means to address malpractice allegations).
arf
August 31st, 2004 at 10:35 am
PRIMARY care is not the problem, and countries with socialized or single-payer systems usually do not have a problem meetimg that need.
SPECIALTY care is where the rubber meets the road.
That is where you start to see the deficiencies. Yes, that Canadian resident will see the primary doc the same day for her sniffles.
And since most people have either no health care issues or minor issues, most people will be “satisfied” with medical care under those systems.
Let that same Canadian (or Brit, etc.) develop a major illness, cancer, heart disease, etc…….then see how long she waits.
Since few people have major health care needs at any time, there are few people complaining about this at any time, hence “more people are satisfied” with those systems.
Evan
August 31st, 2004 at 1:00 pm
So … let’s be clear.
Your argument is that it is far better for those with insurance to have access to specialty care at the cost of no coverage at all for 43 million people then it is to allow any waiting time for specialty care for everyone.
Odd, my patients in HMOs have an average of 2 months between when I refer them and when they see a specialist.
So my patients in an HMO have the worst aspects of what you claim are the Canadian system’s and to make matters worse my patients who don’t have an HMO can’t see a specialist at all … ever.
How does this “meet the health needs of the community?”
I’m not endorsing single-payer Canadian system here. I am saying it’s ethically untenable to allow a system that doesn’t cover all Americans.
chris
August 31st, 2004 at 1:19 pm
No, the current system is not the best system, but it is a great deal better than a single-payer system. The point of the original point was to point out why we need to shift away from anything resembling gov’t control and put the responsibility in the patient’s hands. No one said anything about keeping the status quo, just no one wants to start the downward spiral of a single-payer system. Theres a big difference.
arf
August 31st, 2004 at 5:09 pm
The average Brit or Canadian in their systems can do two months standing on their head. That’s a short wait for them.
You can look at the NHS’s own stats on their website. Bear in mind, when looking at their waiting times, you are seeing their rosy scenario, you are seeing the waiting time to see the specialist, not counting the time waiting to see the GP, and not counting the all-too-frequent cancellations for emergencies there.
There was a paper a while back, in the BMJ as I recall, comparing Kaiser favorably to the NHS. Kaiser does better, more responsive care, at lower cost than the NHS.
Of course, in the UK, the better off are “more equal” as Orwell would have said. They go private and get their specialty care quickly. As, for that matter, do the well-to-do in the socialized system as well. They call it “discrimination by postal code”. The poorer get worse health care and have worse outcome. The rich have better facilities locally, due to better clout and influence in the system. Somehow in the UK, that’s due to inherent inequalities in economics, and in the USA, that’s a result of our evil health care system.
Evan
August 31st, 2004 at 8:17 pm
So lemme get this straight.
We all agree that an ideal health care system should cover everyone? Is that right?
chris
September 1st, 2004 at 1:08 am
Everybody should have ACCESS to a health care system. But I don’t believe the government should responsible for providing it. The people should be responsible for the means of attaining health care, similar to auto insurance. Deregulation of health insurance on a state-by-state basis would make it more affordable, as would tort reform, etc. etc. (http://www.heritage.org/Research/Features/Issues2004/stateinit.cfm)
Evan
September 2nd, 2004 at 1:23 am
The government mandates that everyone has to buy car insurance to have an auto. That’s done by the power of the government.
How would you mandate that everyone has to have health insurance, Chris?
nd
September 2nd, 2004 at 9:06 pm
the congressional joint economic comiittee may 2003 published a report. careful estimates suggest that defensive medicine add @ 100 billion dollar annually to our health care costs. we NEED tort reform
Aaron
September 3rd, 2004 at 12:50 pm
Chris, having lived in Canada and utilized that health system, and having family in Canada which continues to utilize that system, what can I say other than “stop making stuff up”?
Canadians won’t claim that their system is perfect – they know better. But the typical working class Canadian gets much better health care at a much lower overall cost than the typical working American.
The U.S. has the most expensive health care system in the world, in raw dollars or in per capita dollars, yet leaves about 47 million people uninsured and probably at least as many underinsured. Yet the claim is made that the socialized systems are ineffecient and wasteful? Why not punctuate your posts with “Darn that pesky evidence, I’ll believe what I want to!”
arf
September 4th, 2004 at 1:22 pm
I guess that explains why Jean Chretien got his health care in the USA.