America's Failing Health

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

 

August 27, 2004

OP-ED COLUMNIST

 

America's Failing Health

By PAUL KRUGMAN

 

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.

 

Copyright 2004 The New York Times Company