America's Failing Health

[docdru]

http://nytimes.com/2004/08/27/opinion/27krugman.html?hp

America's Failing Health

By PAUL KRUGMAN

Published: August 27, 2004

Working Americans have two great concerns: the growing difficulty of getting health insurance, and the continuing difficulty they have in finding jobs. These concerns may have a common cause: soaring insurance premiums.

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.

The fact is that the mainly private U.S. health care system spends far more than the mainly public health care systems of other advanced countries, but gets worse results. In 2001, we spent $4,887 on health care per capita, compared with $2,792 in Canada and $2,561 in France. Yet the U.S. does worse than either country by any measure of health care success you care to name - life expectancy, infant mortality, whatever. (At its best, U.S. health care is the best in the world. But the ranks of Americans who can't afford the best, and may have no insurance at all, are large and growing.)

And the U.S. system does have very high overhead: private insurers and H.M.O.'s spend much more on administrative expenses, as opposed to actual medical treatment, than public agencies at home or abroad.

Does this mean that the American way is wrong, and that we should switch to a Canadian-style single-payer system? Well, yes. Put it this way: in Canada, respectable business executives are ardent defenders of "socialized medicine." Two years ago the Conference Board of Canada - a who's who of the nation's corporate elite - issued a report urging fellow Canadians to bear in mind not just the "symbolic value" of universal health care, but its "economic contribution to the competitiveness of Canadian businesses."

My health-economist friends say that it's unrealistic to call for a single-payer system here: the interest groups are too powerful, and the antigovernment propaganda of the right has become too well established in public opinion. All that we can hope for right now is a modest step in the right direction, like the one Mr. Kerry is proposing. I bow to their political wisdom. But let's not ignore the growing evidence that our dysfunctional medical system is bad not just for our health, but for our economy.

[docdru]

Hey Kilmer, another Krugman article to thumb your nose at!

[Destino]

I'm not thrilled at the thought of government being used to fix a problem. They rarely fix anything if ever.

In my mind the problem that need to be fixed immediately are as follow:

1-- The flawed concept of shared risk.

2-- Malpractice being an undefined term

3--Lack of real competition for drug companies.

Shared risk protects doctors from lawsuits. Which seems great until one examines the effects. The first effect is larger jury payouts. When one sues a private citizen a 10k award is damaging to the person. That is not the case against a large insurance company, and this is precisely what trial lawyers will argue, and what the juries have accepted.

The second effect is increased cost for all because of the mistakes of the few. One bad doctor losing a large malpractice case raises medical costs for many by raising the insurance premiums for groups of doctors.

This of course leads to the obvious, how do we control the lawsuits. I have always supported a more narrow definition of what constitutes a valid malpractice claim. A risky operation that doesn't turn out right is not worthy of a lawsuit. A doctor who is hammered off mad dog 20/20 during an operation that results in your wifes death is.

More importantly I don't think doctors should be allowed protection from civil suits under a newly defined malpractice law. No more shared risk. If you commit an act of true malpractice you should be punished by more then a higher premium.

The last point on the cost of drugs is a no brainer. We as americans know we are getting screwed and we allow it. Change the system and lower the cost, this should be automatic but the scare tactics of the politicians unwilling to lose a major contributor have been more then effective.

BTW - I dont' think award amounts for lawsuits should be capped. This punishes the victim and doesn't really fix anything. Stop the petty lawsuits and remove the insurance comanies and the cost of health care will decrease far more and serve us better.

[docdru]

Originally posted by Destino

I'm not thrilled at the thought of government being used to fix a problem. They rarely fix anything if ever.

Are you referring to OUR government or the idea of government in general. Because other governments have been successful in implementing health care programs. At least more so than our private system.

[Riggo-toni]

Hmm. Let's see.

Healthcare is too bureaucratic and expensive, so let's let gov't run it. Uh, yeah. Makes perfect sense... :doh1:

[Destino]

Originally posted by docdru

Are you referring to OUR government or the idea of government in general. Because other governments have been successful in implementing health care programs. At least more so than our private system.

Ours. Other governments don't spend as much as we do on things like the military for example and are better equiped to take on massively expensive social issues. Adding things of this size to the federal budget would only balloon government spending and lead to tax hikes in the future.

We can't even stop ourselves from running massive defecits now, a program of this size would only make a bad situation worse. Not to mention that it solves none of the real problem (IMHO) it only hides them behind a curtain of government.

[TheKurp]

Once again the real reason for high medical costs in the U.S. is overlooked.

1. It's because we're a nation of fat lazy-assed couch potatoes.

2. There's no system of incentives or rewards for Americans to be healthy, thus driving down medical costs.

3. There isn't enough emphasis on preventative care.

[Riggo-toni]

Agreed Kurp.

Other factors:

Litigation/malpractice costs

Health costs are paid by a 3rd party (insurers + employers), which is I guess just re-stating your 2nd point.

[luckydevil]

Well, yes. Put it this way: in Canada, respectable business executives are ardent defenders of "socialized medicine." Two years ago the Conference Board of Canada - a who's who of the nation's corporate elite - issued a report urging fellow Canadians to bear in mind not just the "symbolic value" of universal health care, but its "economic contribution to the competitiveness of Canadian businesses."

I am really not that surprised, because businesses (most of them anyway) in this country feel the same way. Big business and big government go hand in hand. There is a reason why some of the biggest fans of government regulation are in fact corporations.

Why you ask?

Because regulation raises costs, which essentially limits competition (maintaining the power and profits of big businesses).

It’s why government regulation is a big scam (a damn shame it’s wrapped in populist rhetoric).

Are you referring to OUR government or the idea of government in general. Because other governments have been successful in implementing health care programs. At least more so than our private system.

There is nothing "private" about our healthcare system.

[Mister Happy]

Originally posted by docdru

The fact is that the mainly private U.S. health care system spends far more than the mainly public health care systems of other advanced countries, but gets worse results. In 2001, we spent $4,887 on health care per capita, compared with $2,792 in Canada and $2,561 in France. Yet the U.S. does worse than either country by any measure of health care success you care to name - life expectancy, infant mortality, whatever. (At its best, U.S. health care is the best in the world. But the ranks of Americans who can't afford the best, and may have no insurance at all, are large and growing.)

How can you say that Canada has better healthcare?

Does anybody really believe that?

[stevenaa]

I absolutely do not want any of my tax dollars to pay for healtcare for anyone. There are companies who provide good health care. Go find one. I did. I have a wife and 3 kids and I don't pay a dime for healthcare. No premium, no deductible and no co-pays. The job before this I payed 500.00 per month for basic healthcare for my family plus copays and deductibles. Healthcare is expensive because we want the freedom to live as we choose. How about we reduce premiums buy making aggressive coverage decisions. Let's deny smoking related cancer coverage to anyone who smokes. Provide enough meds to make the pain bearable,and let it go at that. Also, limit lawsuit winnings for malpractice. Suppose a guy makes 60,000 a year and dies on the table due to malpractice. His family should get 60000 times the years left to average life expectancy adusted for inflation.

[Darth Tater]

Yes, one of the main reasons we have such a health care mess is the rent-seeking behaviour created by government action. The primary supporter of government regulations are those successful rent-seekers who are primarily big businesses. One of the big reasons for the ubiquitious nature of the health care insurance biz was the wage control during WW2 which large companies got around by providing such bennies as health care insurance .

To solve our failing health-care system, we need to return to a free market system, that while not perfect, performed much better than a regulated system. Whatever we do, it should include reduction in government interference to minimize rent-seeking behaviour, drive down spurious demand and look to reduce barriers to entry.