New York Times August 27, 2004
By PAUL KRUGMAN
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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.
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