Friday, April 22, 2005

Krugman on healthcare in America

Somebody ought to give Paul Krugman a medal:

Passing the Buck

A choice excerpt (I'd post the whole columm here, except that would be illegal):
Isn't competition supposed to make the private sector more efficient than the public sector? Well, as the World Health Organization put it in a discussion of Western Europe, private insurers generally don't compete by delivering care at lower cost. Instead, they "compete on the basis of risk selection" - that is, by turning away people who are likely to have high medical bills and by refusing or delaying any payment they can.

Yet the cost of providing medical care to those denied private insurance doesn't go away. If individuals are poor, or if medical expenses impoverish them, they are covered by Medicaid. Otherwise, they pay out of pocket or rely on the charity of public hospitals.

So we've created a vast and hugely expensive insurance bureaucracy that accomplishes nothing. The resources spent by private insurers don't reduce overall costs; they simply shift those costs to other people and institutions. It's perverse but true that this system, which insures only 85 percent of the population, costs much more than we would pay for a system that covered everyone.

And the costs go beyond wasted money.

First, in the U.S. system, medical costs act as a tax on employment. For example, General Motors is losing money on every car it makes because of the burden of health care costs. As a result, it may be forced to lay off thousands of workers, or may even go out of business. Yet the insurance premiums saved by firing workers are no saving at all to society as a whole: somebody still ends up paying the bills.
This last paragraph really jives with what I witnessed in the last couple of years on trips to Toronto and Sydney. Both of these cities are located in countries in which most of the healthcare provided comes from a national healthcare system. This means that businesses, especially small businesses who can't afford to, have no obligation to provide healthcare plans to their workers. Not only does this drastically lower the cost of doing business, resulting in a veritable explosion of small business and entrepreneurship in these cities, but it also makes it cheaper (and therefore easier) for these businesses to hire workers when they need them. And this is all due to a government program, paid for by the taxpapers. Unfortunately, as Krugman goes on to point out in his piece, this sort of thing has become an almost impossible sell in the United States, thanks to right-wing pro-market propaganda.

Of course, one has to ask the question, "But if the American healthcare system is so expensive and useless, why does it have so much support (recalling Bill Clinton's ill-fated attempt to reform the system)?" I think the reason for this is not entirely obvious, but is wholly related to what I've already commented on. The crux of the matter is that, in spite of the ever-increasing costs of healthcare premiums, big corporations are in a much better position to afford these costs than their smaller competitors. This is the key: high healthcare costs not only benefit the healthcare industry, they make it harder for smaller businesses to compete with big companies. They make it harder for smaller companies to expand and hire new workers, and easier for bigger companies to recruit the best workers away from their smaller competitors. Big companies surely know this, and want to keep it that way.

Krugman's column is apparently the first in a series. I'll certainly be looking forward to the next one.


At 2:29 AM, Anonymous Blue Cross of California said...

Krugman points out great views on health care and coverage in america.


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