Paul Krugman: Gold-Plated Indifference

Paul Krugman takes a look at president Bush's latest plan for health care:

Gold-Plated Indifference, by Paul Krugman, Bush and Health, Commentary, NY Times: President Bush’s Saturday radio address was devoted to health care, and officials have put out the word that the subject will be a major theme in tomorrow’s State of the Union address. Mr. Bush’s proposal won’t go anywhere. But it’s still worth looking at his remarks, because of what they say about him and his advisers.

On the radio, Mr. Bush suggested that we should “treat health insurance more like home ownership.” He went on to say that “the current tax code encourages home ownership by allowing you to deduct the interest on your mortgage... We can reform the tax code, so that it provides a similar incentive for you to buy health insurance.”

Wow. ... Going without health insurance isn’t like deciding to rent an apartment instead of buying a house. It’s a terrifying experience... The uninsured don’t need an “incentive” to buy insurance; they need something that makes getting insurance possible.

Most people without health insurance have low incomes, and just can’t afford the premiums. And making premiums tax-deductible is almost worthless to workers whose income puts them in a low tax bracket.

Of those uninsured who aren’t low-income, many can’t get coverage because of pre-existing conditions... Again, tax deductions won’t solve their problem.

The only people the Bush plan might ...[help] are the people we’re least concerned about — affluent, healthy Americans who choose voluntarily not to be insured ... while in the process — whaddya know — giving many other high-income individuals yet another tax break. ...

Mr. Bush is also proposing a tax increase ... on workers who, he thinks, have too much health insurance. The tax code, he said, “unwisely encourages workers to choose overly expensive, gold-plated plans. The result is that insurance premiums rise, and many Americans cannot afford the coverage they need.”

Again, wow. No economic analysis I’m aware of says that when Peter chooses a good health plan, he raises Paul’s premiums. And look at the condescension. Will all those who think they have “gold plated” health coverage please raise their hands?

According to press reports, the actual plan is to penalize workers with relatively generous insurance coverage..., we’re ... talking about ordinary workers who have managed to negotiate better-than-average health plans.

What’s driving all this is the theory, popular in conservative circles but utterly at odds with the evidence, that the big problem ... is that people have too much insurance — that there would be large cost savings if people were forced to pay more of their medical expenses out of pocket. ...

I’m somewhat skeptical about health care plans, like that proposed by Gov. Arnold Schwarzenegger, that propose covering gaps in the health insurance market with a series of patches... But at least the authors of these plans are trying to help those most in need, and recognize that the market needs fixing.

Mr. Bush, on the other hand, is still peddling the fantasy that the free market, with a little help from tax cuts, solves all problems.

What’s really striking about Mr. Bush’s remarks, however, is the tone. The stuff about providing “incentives” to buy insurance, the sneering description of good coverage as “gold plated,” is right-wing think-tank jargon. In the past Mr. Bush’s speechwriters might have found less offensive language; now, they’re not even trying to hide his fundamental indifference to the plight of less-fortunate Americans.

Update: Please see Krugman's "Additional Notes on Gold-Plated Indifference" explaining some of the economics behind the points he makes in this column.

_________________________
Previous (1/19) column: Paul Krugman: Surging and Purging
Next (1/26) column: Paul Krugman: On Being Partisan

Comments

[Movie Guy]

I am not familiar with a new Bush health care plan (if there is another new plan), but I do see the benefit of allowing for tax deductions of health care insurance premiums.

Krugman can scoff at this idea, but for those who are self-employed or retired the deductions can be very beneficial. Sane for most middle class workers.

I have always felt that all health care insurance should be fully deductible.

[Movie Guy]

"Sane" should read as "same".

[chris]

Lordamitey, I love Paul Krugman.

[RN]

I'm with you, Chris.

[bullbust]

The only people the Bush plan might ...[help] are the people we’re least concerned about — affluent, healthy Americans who choose voluntarily not to be insured ... while in the process — whaddya know — giving many other high-income individuals yet another tax break. ...

Heh heh heh. Old man Anatole France said it best.
- "The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread."

[cm]

MG: You have to consider it together with the phrase “treat health insurance more like home ownership”. That means you're on your own, and those with enough money can buy (their own) healthcare insurance. Or perhaps it means you can take out a loan to get healthcare? What's the loan collateral gonna be? Your body parts?

[DeAnna]

Delurking to ask: Why now? So he can accuse the Democratic congress of not caring for the uninsured in the the new Pay-Go era. I feel so Rovian. Ick.

[pidgas]

The tax code, he said, “unwisely encourages workers to choose overly expensive, gold-plated plans. The result is that insurance premiums rise, and many Americans cannot afford the coverage they need.”

Again, wow. No economic analysis I’m aware of says that when Peter chooses a good health plan, he raises Paul’s premiums.

Well, if Paul isn't aware of it, it must not exist!

Pres says, the TAX CODE encourages workers to choose overly expensive plans. What's inaccurate about that? All dollars for employer-sponsored care are pre-tax. That's a substantial subsidy; an incentive to consume.

Over a 20 year period (~1942-1965), the federal government blew the lid off of demand for health care in this country. First they instituted a wage freeze which did not freeze benefits, next they made health insurance premiums a pre-tax benefit, and in 1965 they created fee-for-service Medicare. The government subsidized health care consumption in a big bad way. And initially, it was through the employer-sponsored health insurance subsidy.

Now, I'm sure Krugman deep-down understands that medical care is a scarce resource. What happens when you subsidize consumption of a scarce resource? What if that subsidy is magnified by employer "subsidy" and third-party payers who make money on the flow of every dollar through their hands (thereby lessening their incentive to control expenditures)?

As a corollary, does subsidized consumption of a scarce resource increase or decrease unsubsidized consumption? Through what mechanism might that change occur?

It is entirely plausible (and likely), that Peter choosing a "gold-plated" tax-subsidized health plan (which drives up consumption of a scarce resource) raises Paul's premiums. The degree to which that occurs is magnified further if Paul does not enjoy subsidies Peter receives.

Pid

[Isabel]

"What happens when you subsidize consumption of a scarce resource?"'

I don't know what happens in a theoretical world. In a real world, like, say, France, you cut your spending almost in half (of GDP/capita):

http://www.who.int/countries/usa/en/
http://www.who.int/countries/fra/en/

(Other examples could be given. I chose France, not for the sake of comparing americans to cheese-eating surrender monkeys, but because France is recognized by WHO and/or OECD as the country that gets most bang for their buck)

[pidgas]

Isabel,

First, be careful with those figures/rankings. They are the subject of significant debate, and their methods are extremely controversial.

Second, if you're seriously questioning what happens to consumption when subsidies are in place, perhaps you also question the wisdom of government subsidies for things like solar power, wind power, hybrid automobiles, etc. Perhaps you'd be in favor of an additional employer sponsored pre-tax subsidy on the purchase of gasoline and automobiles. What would happen to prices in general when the employer sponsored folks started jacking up their consumption? They'd go up, that's what.

Now, let's all bask in the glories of the French health system: http://news.bbc.co.uk/2/hi/europe/3423159.stm

France, like all of us, is subject to basic economics. In general, for a given level of demand if scarcity increases prices increase. The question you should ask yourself is, how does the French system cap demand and/or limit price growth?

The answer is broad, but it mainly relies on substantial price controls (which we all know work very well and do wonders for optimal allocation of resources...bleh). Their price per unit for health care services is very low by law, not market determination. This has led to doctor strikes, nursing strikes, and general demonstrations. French physicians have an average net annual income of around $55,000. French hospitals have significant capital expense controls, that means insufficient beds and treatment facilities for mild crises (15,000 dead from a heatwave?). Finally, something like 80-90% of all citizens feel compelled to purchase private supplemental insurance.

All this, PLUS they piggyback on the US subsidization of the pharmaceutical industry (we pay "market" prices on drugs they get for very low cost).

Some miracle.

A couple other sources:
http://hspm.sph.sc.edu/Courses/Econ/Classes/nhe00/
http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=1447687
The Lancet, Volume 357, Issue 9269, 26 May 2001, Page 1633

[Isabel]

Do you really, really, really want to compare?

[anne]

Imagine, the French have no hospital beds, no doctors, no nurses, heat waves, lots of heat waves with the French dying like, well, the Franch, all because of, well, universal health care that is no universal health care but, well, you know. The French are really scary, for, well, the French.

Wonderful article thougth. I love Paul Krugman.

[anne]

Isabel, the idea that there were 20 year price controls is, by the way, nutty; no matter, though, we might have had price controls for 20 years and that would have been enough, even though we didn't.

We, we have too much health care insurance, we have gold plated health care insurance, and therein lies the problem, gold plated insurance, which means insurance we do have must be undone to provide insurance we do not have. I understand. With such nuttiness we can all have no insurance together.

I love Republicanism.

[anne]

Imagine, the French have no hospital beds, no doctors, no nurses, heat waves, lots of heat waves with the French dying like, well, the French, all because of, well, universal health care that is no universal health care but is, well, you know.... The French are really scary, for, well, the French.

Turns out too the French are stealing our drugs too, while I thought the French were only stealing our (shudder) women. Eek.

I love Republicanism.

[Cyrille]

I think it is absolutely fine to be criticizing France, but please do so in a way that makes it look like we are actually talking about the same country.

For example, while I happen to have a "private insurance", I never felt compelled to have it. The point is, what we call social security (which you would call government healthcare I guess), is for public health. So it will pay you for BASIC dental care, but if you want more (which is more cosmetic), you have to pay. I have bad teeth and like good repairs so I had some incentive to have some complementary healthcare, though at first I had none.
Then I moved to a company where it's part of the pay package anyway, so I guess you may argue I felt compelled by the payrise I took when changing company, to take that healthcare that came in the package, but...
And my case is not uncommon at all.

As for 55000$ net per year for physicians (I don't know if it's accurate), pardon me, but I wouldn't weep with that! Especially since many things that you'd have to pay for in the USA are already provided -like our social security, for instance.

Oh, and the price per unit is not low by law: the state determines the price of reimbursement. Some doctors decide to charge more (they must let you know if they do, though). That's OK -you then either get partial reimbursement or have a complementary policy for which you must pay. So neither price control, nor incentive to pay too much.
Also, about indulging in over-consumption, I haven't reached the point where I'd consider a day at the doctor just for the sake of it the best use of my time.

Now, we do have our problems, but let's not completely mischaracterise them. At the end of the day, we spend less than half (though still too much), yet live longer and in a better shape. I'll drink to that.

[malcolm]

My deepest suspicion is that Bush's words can not be
taken at face value. Whereas this sounds redistributive
(let's tax the well offfor the benefits of the not so well off), this is really a ploy to make private health saving care accounts more economically attractive in order to restructure the health care system.

[anne]

Cyrille, I know, I know, but really you do want our women, don't you, really, don't you? Eek.

[Cyrille]

Ah, if you mean Scarlett Johansson well... I might have to confess...

[Isabel]

I must say that I was hoping that someone would step up to the plate and give a proper answer to pidgas because I recognize that mine, socratic as it may be, was not a proper answer...

On the other hand, it is difficult to answer seriously when the international comparisons made by WHO and OECD are dismissed as extremely controversial (who shall we trust, the spokesperson of the Surgeon General office?), most of the arguments advanced are based in theories, not facts, and the few facts are not extremely well informed.

This is way outside my realm of expertise, if I have one (but Angry Bear has an excellent series on international comparisons on this subject, if you are interested). Still I feel compelled to give some answers:

You mention strikes and general demonstrations as if that means that the populace (and it's subsegment, physicians and nurses) are generally very dissatisfied with the system. Never heard so, but it's true that French will strike easily for a raise in pay or against perceived shortcomings of the system. (No Americans, them.)

You mention the physicians income as if it was a bad thing (I have no idea if the numbers are righ), but I never understood why physicians should feel entitled to a stratospheric income (they aren't CEOs, after all).

About not enough beds and hospital facilities, that is something I've often heard about UK (a cheaper system), but not of France. And calling the 2003 a mild crisis is a stretch: you can read how murderous those heat waves can be, especially at the beginning of the season and in mild climates, by reading about Chicago 1995 (and I quote wikipedia: "Eric Klinenberg, author of the 2002 book Heat Wave: A Social Autopsy of Disaster in Chicago, has noted that in the United States, the loss of human life in hot spells in summer exceeds that caused by all other weather events combined, including lightning, rain, floods, hurricanes, and tornadoes."). I assure you that I have never seen a hospital with air-conditioning in Portugal, and the casualties were much, much smaller, in spite of higher temperatures. So other things were at work, that have been studied in great detail (I can look for the links, but they might very well be in French).

About supplemental insurance, Cyrille has already explained. I'll just add that I have one of those gold-plated plans through my employer (not in France, but in Belgium), more generous than the general ones, both in percentages of reimbursement, caps, drugs and therapies covered, etc. But it does have restrictions. I don't have any supplemental insurance. But my brother, with the same health plan and being a prudent "pater familias", chosed to have supplemental insurance to cover his out of pocket expenses in case of a prolonged stay in hospital, etc.

About drugs, I would say that the pharmaceutical industry piggybacks on YOU, but that's another story.

[Isabel]

Oh, just a small detail, if you want to compare: from the American Journal of Public Health 2003 (the second link you offered):

"...coverage of the remaining 1% of the uninsured in France suggests that national responsibility for entitlement is more equitable than delegating these decisions to local authorities."

1%. One percent.

[anne]

(I can look for the links, but they might very well be in French).

Ah, there you have proof, the French have even taken to writing in code. (We know who they are, anyway.)

[anne]

Isabel:

"About drugs, I would say that the pharmaceutical industry piggybacks on YOU, but that's another story."

Brilliant; I am turning Portuguese.

[evagrius]

I'm fascinated by the argument that medical care is a "scarce resource".

I suppose it's a "scarce resource" if it's being monopolized by a few.

Medical care isn't a commodity- it's a social function. After all, those who provide medical care are doctors and nurses etc;,not machines.

The best indicator for overall health throughout one's life is having had excellent pre-natal, post-natal and early childhood medical care and nutrition. If one has that then one has an excellent foundation for overall adult health.

The U.S. lags sadly behind many other countries in this respect. Oh, it has excellent emergency services if one keels over from a heart attack but if one is a child needing vaccinations or nutrition, tough luck.

I'm really tired of reading about health care as a "scarce resource" or commodity.
It isn't.
Having health insurance, ( a commodity), still isn't having health care but it does give one an entry to health care.

But I'd rather see health care for all, especially young children and infants and pregnant women.

[Holly W.]

I might be able to back the president's idea if this were done as a tax credit (and for a reasonable amount that actually paid for insurance), but as a deduction, it's a terrible idea. Sure, $1,500 off a $10,000 family policy (if you're in the 15% tax bracket) is better than nothing, but really barely makes a dent. The irony of low tax rates is that they make deductions virtually meaningless for many people.

[Carter]

It is entirely plausible (and likely), that Peter choosing a "gold-plated" tax-subsidized health plan (which drives up consumption of a scarce resource) raises Paul's premiums. The degree to which that occurs is magnified further if Paul does not enjoy subsidies Peter receives. - Pidgas

Pidgas. The basic problem with your comments is that you show an inability to step out of free market theory when it is largely inapplicable to a social situation. Health care provision in advanced societies is one such area.

Health care is not like the normal commodity, ex. buying a hat or candy where supply & demand are tremendously shaped by the aggregate of personal preferences. This idea of a "gold plated health plan" is ludicrous. I don't have a heart transplant because they're 30% off this week at the local hospital. People overwhelmingly have health attended to because it deals with a particular problem they have . If you don't have prompt care the problem gets much worse & the health care expenditures get multiplied 100 fold.

This is why people without health care coverage, who thus end up in the emergency room, increase national health care costs exponentially. Just to provide them with health insurance would decrease overall health care costs greatly.

[Stormy]

I wonder if you can rent healthcare? Or maybe you can find left-over scraps in the garbage can?

[js paine]

do u all
recall that press spokes -person for saddam??

the press had some cute name for him at the time...
he kept jibbering away
as uncle's guys were racing toward bagdad at break neck speed
flagrantly as if fantasy victories
were near
and plans of revenge and account settling in order ...

well bush has that effect on me now

indeed he's his own best spokes person

why who else
would be willing to read
scripts written
before the november debacle
like nothing has happened ???

now thats really staying " on mission "... eh ??

[pidgas]

Isabel provided the French health system as evidence for her assertion that subsidizing consumption decreases cost to the unsubsidized consumer. Not suprisingly, she did not provide any detail on how France accomplishes this super-natural miracle. She has yet to do so. I suspect she never will.

Her comment was tangential and did not really address my argument. I engaged her to explain that even France is subject to the same economic principles of scarcity. I did not set out to show that France's system is "bad." Just not supernatural.

Paul Krugman made an assertion that I think is false. Specifically, that workers in the United States choosing "gold-plated" plans do not affect the premiums paid by other workers. He did so while mocking the President for suggesting such a thing.

In fact, they do affect those premiums. Their increased consumption makes health-care more scarce (and therefore more costly) to unsubsidized consumers. It occurs through basic economic principles to which we are all subject. Even the French.

Pid

[Cassandra]

Slink...

WeLoveTheIraqiInformationMinister.Com

But it appears from Bush's tone and facial expressions that even he no longer believes the drivel. One wonders whether he is on the verge of an AmericanDreamz moment illustratred by his character in the film portrayed by Dennis Quaid.

[Morgan]

I don't think "gold plated plans" is far off the mark. Take a survey of benefits managers - people preferentially choose what they think is the "best insurance" regardless of its cost. Lower deductibles and fewer restrictions are preferred.

And insurance companies respond with ever more generous plans. Manufacturers and providers respond by producing products that take advantage of that generosity to market higher-margin products and perform more care (reducing the risk of malpractice and increasing the amount received in reimbursement).

And cost spirals up. Meanwhile, a large proportion of the market (employers and employees) has no plan that makes sense for them.

Market mechanisms should kick in to produce lower-cost health insurance with restricted benefits, but a) some people consider that fundamentally unfair because it means that some people get better care than others (look at the criticism Wal-Mart got when it made a cheapo plan available to its employees), and b) insurers hands are largely tied in the kinds of restrictions they can place. They aren't the patients' doctors, and saying "we never cover that new treatment" or "you must start the patient on off-patent drug X, and wait 3 months to see if it's working before moving to drug Y" are very risky things for an insurer's reputation (at least!). Much better to cover everything.

[anne]

No; when I asked Massachusetts Blue Cross/Blue Shield for a copy of a plan, a few months ago, they sent along a single coverage plan for $567 a month with a deduction costing hundreds of dollars before coverage begins and co-pays for everything and anything other than flu shots (oh dear, how the insurance goblins care for whether we are fluey).

The idea of gold plated plans is nonsense. When my doctor and I worry, and we do not care to worry, then I sure do want to be tested and that is not living with gold plating. And, my doctor is a dear.

[anne]

We can afford Iraq (we can't really), then we can afford my health care; just to be completely selfish about it. Of course I have been known to date a surgeon, but that was for other sorts of perks.

[Isabel]

"Isabel provided the French health system as evidence for her assertion that subsidizing consumption decreases cost to the unsubsidized consumer."

No. I provided statistics (that you don't consider reliable) that say (to me, obviously not to you because you dismiss them) that the question of subsidizing consumption (I suppose we can call it that way, because the State picks most of the tab, negotiates with drug companies, etc, on behalf of its citizens) is tangential to the question of cost in this matter, since the French system is cheaper than the American system. Incidentally, the same statistics (useless in this discussion, because you don't accept them) say that the outcomes in France are not worse, in fact are slightly better in a series of health indicators.

You are right, though, in saying that I will not provide details about how France accomplishes this super-natural miracle. I think you can find them at http://angrybear.blogspot.com/
in a series of 7 posts by Kash on the US Healthcare System, on the left side of the screen, under "Topics" (France will show up among other countries, because the perspective is more "why is the US system so innefficient compared to others"; unfortunately, most of the tables, etc, are based on those statistics you don't consider reliable).
Or you can read the link you provided.

[js paine]

cassandra maybe if he thought cheney would shoot him
he'd hide that self distance better

[Scott Ferguson]

The overhaul of Health Care in the US will only occur when GM, IBM and UPS finally decide that they do not wish to be in the Health Care business in addition to the Car/Computer/Delivery business. Ours is an employer-based system in a country where the employers wield all the power. When they get fed up, things will happen. Before that time we will have to be content arguing over French hospital beds.

[pidgas]

STOP THE PRESSES!!! EVAGRIUS DECLARES HEALTH CARE A SOCIAL FUNCTION, NOT A SCARCE RESOURCE!!!

Everything used to provide care is not scarce!!! CT scanners, MRI scanners, operating rooms, sterilization facilities, hospital beds, clinic tables, otoscopes, laryngoscopes, fiber-optic scopes, sutures, scrubs, syringes, needles, IV bags, IV poles, pumps, implantable defibrillators, artificial knees, artificial hips, ventilators, electronic monitors, electronic health records, radioisotopes, PET Scanners, central lines, IVs, dialysis machines, etc... it's all FREE now and in unlimited supply!!! Thanks Evagrius!

Oh, don't forget that we've also got an unlimited supply of medical expertise! We've got an infinite number of expert doctors (of all flavors), pharmacists, nurses, respiratory therapists, social workers, unit coordinators, hospital administrators, radiology techs, surgery techs, physical therapists, etc.

Yes, we've all arrived in Xanadu. Evagrius, be sure to let your boss know that you're time is not scarce. You can work MORE than 168 hours per week at their discretion. You aren't going to die, and you can shift time so that there are more than 24 hours in a day. If you do that, I'll tell the medical providers that they're in the same boat. Tough darts for them. Health care is not a scarce resource, it is a social good.

Carter, while health care is not a commodity with perfectly elastic demand, it is a scarce resource that does respond to market forces. You're right, a certain amount of demand is completely inelastic. But a substantial portion is elastic. National Health Expenditure growth went from about 6% in 1960 to 16% per year by 1980. That wasn't all price inflation! Fee for service Medicare substantially increased demand.

It is completely tangential to talk about the hidden costs of chronic conditions. Such "hidden" costs exist in many areas of economic life, be it home ownership, car ownership, pet ownership, or something else. Such "externalities" are frequently not reflected in market pricing. I believe that represents a kind of market failure. It does not render market forces irrelevant or impotent.

Finally, your tangential comment makes my point. It is doublespeak to say that demand is inelastic on the one hand ("I don't have a heart transplant because they're 30% off this week at the local hospital.") then insist that we could reduce national health expenditures by providing subsidized care. You propose that, "Just to provide them with health insurance would decrease overall health care costs greatly." HOW?!! If demand is inelastic, consumption would stay the same regardless of consumption cost! Ahhh, but there's the rub. Your own argument relies on demand being elastic and subject to influence by market forces.

Thanks for making my point.

[pidgas]

Anne,

Isabel, the idea that there were 20 year price controls is, by the way, nutty; no matter, though, we might have had price controls for 20 years and that would have been enough, even though we didn't.

I never said that we had 20 years of price controls. We had price controls that froze wages between roughly 1942 and 1945. The War Labor Board and Congress decided that "fringe benefits" were not subject to the freeze and Congress declared health-insurance benefits untaxed. Employers, therefore, competed for workers by offering more generous health insurance benefits. This, combined with increasing capacity and drive up consumption and in 1965 Congress enacted fee-for-service Medicare.

[cm]

evagrius: "Commodity" is often given a derogatory connotation. The dictionary definition is something along the lines of "a product or service available in standardized qualities". This has nothing to do with scarcity. Gold and platinum are commodities, and undoubtedly scarce (relative to demand for them).

Is healthcare a commodity? I don't see the generally accepted taxonomy of standardized qualities. Parts of it certainly are. Glucose screening, administring shots, etc. Beyond that, much less so.

[jamzo]

gw is still "salesman in chief"

i am sure the health insurance industry is very appeciative of the president's boosting of their
"consumer-driven" health care strategy - health savings accounts and low deductible insurance policies and all that

[JRossi]

Right now a lot of preventive care and disease-monitoring does not get provided because people can't afford it. For example, the best test for colon cancer screening is a colonoscopy, which is recommended starting at about age 50 for average-risk people. But it costs $1500 or more, and most people whose insurance doesn't cover it don't get it. Every three-month monitoring for hypertension and diabetes are also often not done according to guidelines because of the out-of-pocket costs to patients. And the list goes on and on. Right now a tremedous amount of care that could benefit people does not get provided. If it does get provided, it will cost.
Universal care(which I favor)will have to come with some rationing mechanism or costs will continue to rise at a high rate and might accelerate.

[evagrius]

pidgas;

No need to SHOUT!

What you mention are basically products that have very little to do with essential health care, certainly not the type I was mentioning.

Didn't you notice my further point; that early pre-natal, post-natal, infant and child health care and nutrition is the best indicator of health status for a population as it ages?

None of that costs very much, certainly not in comparison to health care for sick adults.

But all of that 'preventative' care is really a social function, depending on how society makes available such care and how it communicates that availabilty to those who need it.

France has good health outcomes because, as a society, it treasures children.

I speak from experience regarding that. I grew up in France till I was 10. I suffered from asthma, ( a victim of the London inversion), had an episode of typhoid. I was given treatment for asthma that included a nice stay at a health spa, with exercises, excellent food, saunas, etc; etc; And the stay at the hospital for typhoid was top-notch. None of it was billed to my mother. I don't think the same would have happened in the U.S.

So...keep on shouting about how scarce it all is when it really isn't as far as essentials are concerned.

[Morgan]

jamzo:

I assume you mean "high deducible insurance policies"

Consumer-driven health care is not particularly pushed by insurance companies. They make money either way. They would, of course, like to get the currently uninsured into the insurance market. No customer = no profit. But relatively cheap high deductible plans have been available for a long time - it's just the addition of the Health Savings Account that's new. And that doesn't seem to be a benefit designed to attract the typical uninsured person.

[pipo]

Pidgas

You were all for modesty and politeness a little while ago, where did all that attitude come from.

What strucks me most about free market afficionados like yourself is the inability to grasp the nature of anything as a social function, as well the superiority of human life over efficiency. I come from Greece, which is incomparable to the US and France in terms of GDP, but with a pretty decent, albeit somewhat inefficient, welfare state.

Here is a link from a NY Times piece comparing Greek and American healthcare. I think it's pretty revealing http://www.nytimes.com/2006/10/18/business/18leonhardt.html?ex=1169614800&en=605a5b52701e5d1a&ei=5070

(Btw, being son of two doctors, I can attest that what the hero of the story observed was actually old, rather than dirty hospitals. Still, I would much rather have old facilities with top-notch, free healthcare, rather than five-star hospitals made for the few).

[donna]

Bush knows nothing about health care. He's never had to deal with it.

But then, Bush knows nothing about anything, other than screwing up anything he touches.

Please don't let him near my health care.

[pipo]

The link above is incomplete, it should be

http://www.nytimes.com/2006/10/18/business/18leonhardt.html?ex=1169614800&en=605a5b52701e5d1a&ei=5070

[pipo]

Looks like the webmaster really does not want people seeing this article

http://www.nytimes.com/2006/10/18/business/18leonhardt.html
?ex=1169614800&en=605a5b52701e5d1a&ei=5070

[ken melvin]

Bush will plead innocent by reason of insanity.

[ken melvin]

There may be 'market mechanisms'. I think they exist. But they sure as hell are not benevolent gods. In fact, there are lots of things these 'mechanisms' do very badly, few they do well, and many they don't do at all.

[ken melvin]

Pidgas, obviously you are right wing, but, any association with the healthcare industry you wish to declare?

[anne]

Pipo's reference:

http://www.nytimes.com/2006/10/18/business/18leonhardt.html?ex=1318824000&en=c7639853d0a67b19&ei=5090&partner=rssuserland&emc=rss

October 18, 2006

A Lesson From Europe on Health Care
By DAVID LEONHARDT

Shortly before he moved to Greece last year, an American named John Econopouly received the unpleasant news that he needed a hernia operation. He had the surgery done in Northern California, and it didn't go so well.

After spending less than a day in the hospital as an outpatient, Mr. Econopouly went to a friend's house to sleep off the surgery and found that his wound had reopened. "I woke up in a pool of blood and didn't know what to do," he remembered. "Basically, I didn't feel cared for."

For this, he paid more than $2,000 over and above the thousands of dollars that his insurance policy paid.

A few months later, once he had moved to Greece, he found out that he needed a separate operation for another hernia, giving him a chance, unwanted as it may have been, to do his own little comparative study of American and European medicine.

The Greek hospital was much dirtier than the one in California, he said, and he was put in a room with a handful of other patients. The stench was brutal. When Mr. Econopouly, a 41-year-old computer programmer for Wall Street, asked for more privacy and said he would be happy to pay extra, the staff laughed at him.

But the care itself was another story. It seemed much more thorough than it had been in the United States. He spent the day before the operation undergoing tests, including one that discovered a heart murmur, and the day after the operation in the hospital being observed. Although he didn't have Greek health insurance, his final bill was only $700.

A few weeks ago, I wrote a column arguing that this country's increased medical spending over the last half-century has, on the whole, been overwhelmingly worth it. Thanks to new treatments for everything from premature births to heart attacks, human life has continued to lengthen — defying expectations — even without major improvements in public health. Yet, strangely, we talk about medical spending as if it were nothing more than a drag on the economy, rather than an investment in the most important thing of all: our well-being.

I received about 500 e-mail responses from readers, and the most common reaction was a version of a simple question. "Why do Americans spend so much more than folks in most other developed countries while getting worse results?" as Sumati Eberstadt of East Greenwich, R.I., wrote.

In Greece, the government and individuals combine to spend about $2,300 per capita on health care each year, and the average life expectancy is 79 years. Canada, where the hospitals are probably cleaner, spends about $3,300, and people live to about 80. Here in the United States, we spend more than $6,000, yet life expectancy is just below 78.

The answer to this riddle turns out to be fantastically complicated —but also fantastically important. Health care costs are already rising at an unsustainable rate, and baby boomers are now entering the most medically expensive years of their life. So if the rest of the world has something to teach us, we should be taking it seriously....

[anne]

Pipo, when posting a link do not worry if it is partly hidden for the link will still work when pasted. There however is the article you referenced.

[pidgas]

Ken, Pipo, Evgarius,

Well, what can I say? I get a little irked when people suggest that health care is not a scarce resource. Since people render care and people have scarce time, health care is a scarce resource. The scarcity of supplies and knowledge only amplifies health care's fundamental nature. Insisting that it's not scarce "as far as the essentials are concerned" is fantasy.

I am a functioning market aficionado...not a free-market ideologue. I think functioning markets are dandy. I don't worship them any more than I worship electromagnetism or gravity. Markets are the fundamental building blocks of economies, and most primitive markets are essentially free. They are fundamental, and even non-human species have an appreciation for certain economic principles (e.g. valuation http://www.mind.duke.edu/files/sites/platt/pub/2341148909.pdf).

Markets have made modern life possible. But I recognize that they fail miserably under certain situations. Market failures are well described, and what we currently have in the US health care is hardly a functioning market. But we engineer spectacular things using our understanding of gravity and electromagnetism. There is no reason we cannot engineer systems using our understanding of markets. What we cannot do is disregard the market. We cannot simply declare this or that without respecting the market and engineering within it's constraints. To do so invites disaster.

Appreciating free and functioning markets does not make me a heartless monster or render me incapable of valuing human life over efficiency. But valuing one human life over efficiency may deny another human life needed care when the needed resource is scarce and inefficiently spent on another. Failing to recognize that issue is at least equally immoral.

We are fundamentally natural and nature is a marketplace. We would do well to respect that. History is riddled with stories of men who tried to force their will on nature. Many such men have met with spectacular failure, still others contributed to our understanding of the Law of Unintended Consequences.

"Didn't you notice my further point; that early pre-natal, post-natal, infant and child health care and nutrition is the best indicator of health status for a population as it ages?" Of course I did. My life is dedicated to the care of kids, particularly premature infants and those who become ill during the first month of life. I am compelled to this dedication by recognition that our conclusions are only as good as our assumptions. That the foundations we lay contribute to future prosperity.

But that is also why I so vigorously insist that we recognize health care as a scarce resource. Even if we declare it a social right, it will remain a scarce resource. We must allocate it to provide maximum value. But valuing health care is a tricky thing, and developing systems that harness the power of the market are preferable to those that declare the market irrelevant.

Respectfully,
Pidgas

[pgl]

Arnold Kling gives the Bush plan an A+, which got Greg Mankiw praising Arnold. Greg also decides to "summarize" Paul Krugman's oped by claiming that Paul simply called Bush "wicked". Greg's readers fired back but then Arnold stepped in with his own cheap shot comment at Paul. Sad to say - but the pathetic nonsense over at the National Review is actually more informative today than Mankiw's blog.

[pipo]

Thank you anne for the assistance, and for passing the message through.

In Greece, too, there has been considerable debate on the future of the healthcare system because of aging baby boomers. However, as with most of Europe, the most radical (and controversial) change that has been suggested is raising the retirement age (from 65 to 67 for both sexes), while giving incentives for people to either retire before or after this age, with different pensions, naturally. An even more effective measure, in my point of view, is to leagalise all illegal immigrants pronto. This gives authorities at least a 30 year margin to think things through, all the while giving the kiss of life to the current system.

[Movie Guy]

Here is the President's radio address:

President's Radio Address - Health Care
January 20, 2007

Transcript:

THE PRESIDENT: "Good morning. For many Americans, the new year began with a resolution to live a better and healthier life. Whatever goals you have set for yourself this year, one goal we can all share is reforming our Nation's health care system."

"Americans are fortunate to have the best health care system in the world. The government has an important role to play in our system. We have an obligation to provide care for the most vulnerable members of our society -- the elderly, the disabled, and poor children and their parents. We are meeting this responsibility through Medicare, Medicaid, and the State Children's Health Insurance Program. We must strengthen these vital programs so that they are around when future generations need them."

"For all other Americans, private health insurance is the best way to meet their needs. But rising health care costs are making insurance too expensive for millions of our citizens. Health care costs are growing more than two times faster than wages, and this is making it harder for working families to buy insurance on their own. Rising costs are also making it harder for small businesses to offer health coverage to their employees. Our challenge is clear: We must address these rising costs, so that more Americans can afford basic health insurance. And we need to do it without creating a new Federal entitlement program or raising taxes."

"Our Nation is making progress toward this goal. We created Health Savings Accounts, which empower patients and can reduce the cost of coverage. We are working to pass Association Health Plans, so that small businesses can insure their workers at the favorable discounts that big businesses get. We must pass medical liability reform, so we can stop the junk lawsuits that drive costs through the roof and good doctors out of practice. We've taken important steps to increase transparency in health care pricing, and give patients more information about the quality of their doctors and hospitals."

"One of the most promising ways to make private health insurance more affordable is by reforming the Federal tax code. Today, the tax code unfairly penalizes people who do not get health insurance through their job. It unwisely encourages workers to choose overly expensive, gold-plated plans. The result is that insurance premiums rise, and many Americans cannot afford the coverage they need."

"We need to fix these problems, and one way to do so is to treat health insurance more like home ownership. The current tax code encourages home ownership by allowing you to deduct the interest on your mortgage from your taxes. We can reform the tax code, so that it provides a similar incentive for you to buy health insurance. So in my State of the Union Address next Tuesday, I will propose a tax reform designed to help make basic private health insurance more affordable -- whether you get it through your job or on your own."

"As we reform the Federal tax code, we will also support the innovative measures that states are taking to address the problem of the uninsured. Governors across the Nation have put forward plans to make basic private health insurance more accessible for their citizens. When I go before Congress next week, I will announce a new effort -- led by Health and Human Services Secretary Michael Leavitt -- to help governors reduce the number of people in their states without private health insurance."

"All of these changes are based on a clear principle: Health insurance should be available, it should be affordable, and it should put you and your doctor in charge of your medical decisions. I look forward to working with Congress to pass the initiatives that I lay out next week, so we can help millions more Americans enjoy better care, new choices, and healthier lives."

"Thank you for listening."

[Movie Guy]

Bush Administration policy matters and proposals related to health care are located here:

Strengthening Health Care
White House

[evagrius]

pidgas;

"We are fundamentally natural and nature is a marketplace"

?

I don't quite understand this. Nature is a marketplace?

This is a rather interesting notion. I'm curious as to where you derive this notion from.

As for your work, you then obviously know that pre, post-natal care etc; is the best way to reduce your work and make you, ( a scarce resource), more available for others.

And thank you for not "shouting".

[pgl]

Max Sawicky and Ezra Klein actually say a few nice things about the Bush proposal.

[Isabel]

"Americans are fortunate to have the best health care system in the world."

I always wonder if they they really think that "health care" and "health care system" are the same thing. Are they misleading or mispeaking?

[yan]

In patient care beds per 1000 population

France 8.7
United States 4.0

In patient care % of available beds

France 81%
United States 68%

Total health employment per 1000 population

France 26.2
Germany 27.9
UK 19.8
Japan 19.1
United States 32.6

Total practicing physicians per 1000 population

France 2.8
United States 2.6

Average annual income of physicians (PPP adjusted)

United States $199,000
Germany $104,700
Japan $62,273
France $62,007
UK $52,547

The sheer number of employees involved in the healthcare industry (and higher average compensation) goes a long way to explain the difference in costs between the United States and other large industrialized nations.

[Movie Guy]

Frankly, I do not believe that it matters what the President proposes as there will be opposition from all sides. Opposition to program expansion, oppposition to cost increases, and, in general, opposition to whatever is proposed.

Of course, if the President did not propose any new measures on health care in his State of the Union address tomorrow night, there would have howls over lack of action on the health care front. Yet, only one of the following Administration initiatives appears to receive any attention.

On August 22, 2006, President Bush Signed An Executive Order To Help Increase The Transparency Of America's Health Care System - Empowering Americans To Find Better Value And Better Care.

To spend their health care dollars wisely, Americans need to know their options in advance, know the quality of doctors and hospitals in their area, and know what procedures will cost. When Americans buy new cars, they have access to consumer research on safety, reliability, price, and performance - and they should be able to expect the same when they purchase health care.

This Executive Order Directs Federal Agencies That Administer Or Sponsor Federal Health Insurance Programs To:

1. Increase Transparency In Pricing. The Executive Order directs Federal agencies to share with beneficiaries information about prices paid to health care providers for procedures.

2. Increase Transparency In Quality. The Executive Order directs Federal agencies to share with beneficiaries information on the quality of services provided by doctors, hospitals, and other health care providers.

3. Encourage Adoption Of Health Information Technology (IT) Standards. The Executive Order directs Federal agencies to use improved health IT systems to facilitate the rapid exchange of health information.

4. Provide Options That Promote Quality And Efficiency In Health Care. The Executive Order directs Federal agencies to develop and identify approaches that facilitate high quality and efficient care.

The Federal Government Is A Major Participant In The Health Care Market. Medicare beneficiaries, health insurance beneficiaries at the Department of Defense and Department of Veterans Affairs, and Federal employees represent about one-quarter of Americans covered by health insurance. This Executive Order builds on the Federal government's existing efforts to release Medicare payment information for individual health care providers.

Consumers Will Receive Information Through A Collaborative Process. The Federal government will work collaboratively in this process, building on efforts by quality alliances that include a broad range of health care stakeholders to improve quality and cost information. Measures of quality at the provider and health plan level will be developed from private and government sources and will not involve developing or releasing data at the individual patient level. Participation in this process in each area will be governed by various regional stakeholders, including local providers, employers, and health plans and insurers. Consumers will be able to access information from a variety of potential sources, including insurance companies, employers, and Medicare-sponsored websites.

The President's Health Care Agenda Includes:

Allowing Small Businesses To Form Association Health Plans (AHPs). The President has called on Congress to allow small businesses and civic and community groups to form Association Health Plans (AHPs), which would allow these groups to join together across State lines to purchase health insurance. This would give them the same advantages, administrative efficiencies, and negotiating clout enjoyed by big companies and labor unions.

Passing Medical Liability Reforms. The President has called on Congress to pass medical liability reforms that would help injured patients get quick compensation for economic losses while reducing frivolous lawsuits. Frivolous lawsuits and excessive jury awards limit access to health care by driving providers out of many communities. They also increase patients' costs by forcing doctors to practice defensive medicine.

Expanding Health IT. In 2004, the President launched an initiative to make electronic health records available to most Americans within the next 10 years. The Administration is working to expand the use of health IT to increase efficiency, reduce medical errors, and improve quality of care while protecting patients' privacy and personal information.

Expanding Health Savings Accounts (HSAs). In December 2003, the President signed legislation establishing HSAs that allow Americans to save tax-free dollars to pay for out-of-pocket medical expenses and save for future longer-term costs. HSAs give Americans more control over their health care spending, leading to better treatment at lower costs.

----

Observations:

I do not believe that the Administration or the Congress have proposed or incorporated into law many improvements in the U.S. health care system other than appropriation measures to keep afloat hospitals overburdened with illegal aliens and Americans without health care coverage. Perhaps a discussion focusing on expanding Medicaid eligibility and funding would be worthwhile, but that would involve a careful review of actions in all 50 States.

If a new health care proposal is forthcoming from the Administration (and apparently this will happen), Congress will have every opportunity to add desired changes and improvements to federal support for health care when such proposed legislation is presented for Congressional consideration. Perhaps some posters' attention can be focused on possible add-ons as well as substitution legislation. Just a thought.

[anne]

"Arnold Kling gives the Bush plan an A+, which got Greg Mankiw praising Arnold."

Arnold Kling has the intellect of a toothbrush. Greg Mankiw is a Republican's Republican and just can't help himself. What more need be noted?

[anne]

Van, that was nicely done.

"Max Sawicky and Ezra Klein actually say a few nice things about the Bush proposal."

Max Sawicky did not understand the bizarre Bush proposal, which Brad DeLong is helping him to do. Ezra Klein; well, duh.

[anne]

"Americans are fortunate to have the best health care system in the world."

Ah, is there no end to our bests? And, you wonder why the French are (shudder) after our women.

"Greg also decides to 'summarize' Paul Krugman's oped by claiming that Paul simply called Bush 'wicked'."

Greg's a Republican; get it, a Republican.

[anne]

http://select.nytimes.com/2007/01/22/opinion/22herbert.html

January 22, 2007

Your MasterCard or Your Life
By BOB HERBERT

A disturbing new report shows that with health care costs continuing their sharp rise, low- and middle-income patients are reaching for their credit cards with alarming frequency to cover treatment that they otherwise would be unable to afford....

The report, released last week, was jointly compiled by Demos, a public policy group in New York, and the Access Project, which is affiliated with a health policy institute at Brandeis University and is trying to broaden the availability of health care in the U.S....

According to the report, called "Borrowing to Stay Healthy," about 29 percent of low- and middle-income families with credit card debt reported using their credit cards to pay medical expenses — in most cases for major medical problems.

Over all, a full 20 percent of low- and middle-income families with credit card debt said they had used their cards to cover major medical expenses over the prior three years.

This indebtedness — subject to monthly late fees and penalties, and interest rates that can reach 30 percent — only adds to the trauma of serious illness.

It's believed that 29 million Americans are burdened with medical debt of one form or another. Individuals who are already saddled with medical bills that they can't pay are much more likely to avoid further medical treatment and to leave drug prescriptions unfilled. Such decisions often have life-threatening consequences.

There is an epidemic of personal bankruptcies in the U.S. and medical factors are believed to play a role in as many as half of them....

[anne]

http://maxspeak.org/mt/archives/002801.html

January 22, 2007

BUSH'S NEW TAX
By Dean Baker

We should not assume that it is just workers with gold-plated plans that will get nailed by W's cap on deductibility. Sick people, as in people who actually need health care, will often be forced to pay higher prices for insurance, that's the way markets work (btw, one reasons why those no good union types have expensive plans is that many of the people covered are in their fifties and have spent a working lifetime breathing crap in factories -- these folks also have bigger than normal hospital bills).

So, W will be denying full deductibility to many sick people with high insurance costs. Is that the greatest sin of this president? Hell no, it's probably not even in the top 350, but it sure ain't the smartest way to incrementally go about reforming the health care system.

[fiskhusjim]

Pidgas and his ilk have no interest in reforming the health care system in this country - they are only interested in specious but plausible-sounding arguments that support the unsupportable profiteering and exploitation of the desperate workingman.

Capitalism at base is about putting a quality product on the market and hoping that the customers who buy it are satisfied enough to give you enough of their money for you to keep some.

Republicans DETEST that kind of capitalism - they are seeking to force people to give them money for absolutely nothing and preserving privilege for those currently privileged - kind of the way the current HSA system is (not) working. And that kind of "welfare mentality", that kind of "entitlement mindset" is a far greater danger to the continued success of this Great republic than providing a truly affordable healthcare safety net for ALL citizens.

[evagrius]

I really wish that people would quit blaming high health care costs to illegal immigrants. It's a canard that has to be abandoned.
Go ahead. Blame them for everything wrong.
The fact is that undocumented aliens do not use health services any more than anyone else.
About the only services they use are for pregnancy and children.
I hope no one wishes to have SSI children born to undocumented women or sick children in schools.

[Noni Mausa]

Regarding scarce resources:

Suppose we determine that our society needs ~rolls up sleeves, pulls numbers from air~ 10 MDs and 30 nurses per 10,000 citizens.

Suppose that we find we only have 3 and 10 respectively -- and those people badly overworked, too.

Can anyone tell me why we don't for a generation or so, train every acceptable candidate for medical positions? Make it easy for there to be lots and lots of MD's, RN's, LPN's, etc.

We've been crying for doctors and nurses for as long as I've been reading papers (40 years or so). We should be swimming in health care professionals, there's such a demand. Not to say that all people trained in these fields would have to work full time in these fields, but they would be there in solution, ready to be precipitated if needed.

Noni

[john c. halasz]

Well, I let other people pile on Pidgas, but, since no one has remarked on the point, his complaint about the explosion of costs since medicare passed due to fee-for-service payments ignores the fact that that was a compromise on the legislation with the AMA, which was the only way that they could get the legislation passed at that time. That seems to me to be a case in point of the "free market" at work, as it actually "works" in the real world, and not a case to the contrary.

[evagrius]

But there's a monopoloy situation going on. Just look at the AMA.

[JRossi]

Noni, Nurses are underpaid, based on their job demands and the pay of alternative jobs available to potential nurses. Training more nurses would be difficult if people don't want to go into nursing. Importing nurses helps some.
Doctors are not underpaid and finding qualified applicants has not yet been a problem, but training MDs in med school and residency is very expensive. Society would have to come up with money to do this.

[Movie Guy]

For those who are serious about health care statistics, Kaiser is an excellent source. Perhaps the best source available.

The Kaiser Family Foundation - Health Care

Kaiser- Snapshots: Health Care Costs

Kaiser - Trends and Indicators in the Changing Health Care Marketplace

Kaiser - State Health Data

[yan]

Noni:

Based on comparative statistics, the US does not have too few doctors or nurses relative to other large industrialized nations. In fact the US has higher employment in healthcare related occupations than most other OECD countries. However, these are neither doctors and nurses since those ratios are counted separately. In addition to doctors and nurses, the US has about 20 more people per thousand working in the healthcare industry.

[Noni Mausa]

Thanks Yan, thanks JRossi.

[Rob]

Currently, since workers are not paying directly for their healthcare they have little concern about the price or quantity of treatment they received. Not only does this raise the price of healthcare by increasing demand, but it also prevents competitive pricing among medical professionals since costs are of no concern to the patient.

Bush’s plan wants the consumer to pay for their own healthcare with insurance providing protection in case of a catastrophe. This will drive prices down in multiple ways.

People will now have a greater incentive to take better care of their health since they will directly bare the financial costs. This should create a healthier society, decreasing the demand for healthcare and therefore bringing down the price.

Patients will also show concern about the price of their treatment forcing the medical profession to competitively price their services and develop less costly treatments.

It appears to me that by allowing the market to work the price of medical care should decrease. Feel free to explain where I went wrong in my analysis.

“Again, wow. No economic analysis I’m aware of says that when Peter chooses a good health plan, he raises Paul’s premiums.”
I can't believe this guy has a column in the NY Times.

Let us imagine we live in a world where our employer pays for our grocery bills. Would we ever look at the price of food? The grocery store would charge insanely high prices knowing that the consumer isn’t concerned with the price and meanwhile the consumer is going to eat like a king. If your Paul and don’t have food insurance your going to be paying a lot more then if consumers were directly paying for their own grocery bill.

Now replace the word grocery with medical and food with healthcare.

[evagrius]

Yes, I can see how the "market" would work in health care.

Discount surgery centers, half-off sales, 10% down, no payment until 2008, no credit checks, winter kidney transplant sales, year-end clearance sales, Christmas specials,etc;etc;

I hope Rob knows a cheap doctor who'll haggle with him when he's sick.

[pidgas]

I am, by no means, an advocate of the status quo. Nor do I "detest" honest capitalism or seek maintenance of "privilege for the privileged."

Not withstanding fiskhusjim's baseless assertions about me or Tom's assertions that I'm "right wing," I sincerely support reform and am by no means "right wing." To me "reform" does not imply nationalization or tax-funded provision of care. I question the long term viability of such a model, and there is ample evidence to support that view.

Evagrius, there's not a monopoply situation going on. It's actually much closer to the opposite: a monopsony. There is an 800lb gorilla already in the room and making a mess. ~50% of all health care dollars in this country are spent by the Government and most private payers (another ~35%) set their prices based upon government reimbursement levels.

This massive spending by the government and our current crisis are only ~60 years in the making (~40 if you count from the beginning of Medicare). Given that things have just gotten worse more quickly as government has expanded its involvement in paying for health care, should it really come as such a shock that many question the wisdom of expanding its role further!?

As far as the AMA goes, I'm shocked SHOCKED to hear anyone suggest that their motivations might be to get doctors more money. Of course, that said, their membership numbers have been sagging for more than a decade. Its reputation among physicians has been in the mud even longer.

In my opinion, the AMA is an ignoble organization that purports to represent physicians and patients but more often represents its own interests. Their role in creating the current debacle should not go overlooked.

Of course, all of this is barely tangential to my original comment (that increased consumption enabled through subsidized "gold-plated" employer-sponsored health plans can increase the cost of health care for unsubsidized citizens). NONE of the subsequent responses to my comment have even come close to addressing its assertions. I honestly welcome intelligent substantive comment, but won't get my hopes up based upon the majority of responses so far.

I still think Krugman is dead wrong on this point, and it is a major part of his argument. However, as Anne might well point out, "He's a Democrat." Oh, touche.

Respectfully,
Pidgas

[Noni Mausa]

Rob: "People will now have a greater incentive to take better care of their health since they will directly bare the financial costs. This should create a healthier society, decreasing the demand for healthcare and therefore bringing down the price."

When I was a wee thing back in college, arguments like this would convince me. Young adults are vulnerable to arguments which don't take messy human motivation into account. That's why they can be so savagely compassionate and so compassionately savage.

Every adult in the western world knows that it is cheaper and healthier to not smoke, to get exercise, to eat their veggies and take their vitamins and eschew junk food. But there is a considerable threshold between knowing these things and doing them.

People got lots of exercise and ate unprocessed food at the turn of the century NOT because they were wiser than we are, but because their whole society built in a necessity for activity and sold mostly unprocessed food. Ditto the scourge of tobacco -- smoking was known of for centuries, but chain-smoking only really became possible when cigarettes were invented, pipes and cigars being bulky and inconvenient.

Shoveling coal into the furnace, walking into town for groceries (or taking the buggy, but that was work too), making pickles, cleaning the chicken house -- all the labour my parents took for granted has largely been made impossible for us.

Driving up the cost of health care without building activity into our lives will simply mean we get less health care, that's all. One in a hundred might become a "steel-drivin' man", the rest will languish.

Noni

[ken melvin]

"~50% of all health care dollars in this country are spent by the Government and most private payers (another ~35%) set their prices based upon government reimbursement levels."

No problem. When I was just a boy, in a very remote, rural area, people had strokes and people sat up with them whilst they died. Same if they broke a hip or got cancer. No big hospital or nursing home bills. Few old seedy veterans hospitals around to kinda take care of WWI and Spanish American vets. WWII survivors didn't seem to use them.

See the problem is: since then most people who have strokes recover and live a long time. Millions of WWII vets used VA hospitals as they aged. Then there were the Korean, the Vietnam, Gulf One, and now Iraq.

So, the solution is simple. Let those who have strokes, cancer, break hips, etc., die. And, end wars.

[evagrius]

There's no substantial response perhaps because your point isn't accurate enough.

It's the profits, man, the profits.

That's what's driving health care costs, nothing else.

Gotta make those bucks and, basically, between the patient and the health care there's a mile long row of eager bloddsuckers, gorging themselves on the money flow, from the insurers, to the drug companies, the medical equipment companies, etc;etc;

It's profit. No one wants to talk about that since that's "The Market".

And no, this isn't economics. It's not economic theory or scarcity theory or anything like that at all.

It's culture. It's "culture" only in the sense that it's what unifies a nation but, in this case, it's only money. It isn't about honor, or virtue, or treating others with dignity, or any other cultural value, of which there's a short amount in the U.S. It's money.

There's no left or right about this.

Sorry, but after working in the area of health care, seeing so many people needing it and not receiving it, seeing so many wasting resources on vanity projects, seeing so many discuss the need for health care but not being able to do anything because of money politics, ( can't offend those insurance companies), seeing health awareness programs disappear because you can't offend food manufacturers or advertisers, etc; etc; it's difficult not to be cynical about it.

[cm]

"The stench [in the Greek hospital] was brutal."

Like what, the stench in a Safeway freshly mopped with disinfectant, chlorine, and ammonia? One of my biggest put-offs when I came to the US.

[pidgas]

So I'm not an economist, but Andrew Samwick is. And he echos my original comments regarding Krugman's assertion. Apparently what I as describing is known as a pecuniary externality. Read for yourselves, he says it prettier:

http://economistsview.typepad.com/economistsview/2007/01/paul_krugman_ad.html

Pid

[Pidgas]

Here's the URL, but smaller so it'll work.

http://pages.citebite.com/m8h6n0g4xntl

[Movie Guy]

pidas,

Your argument was correct from the beginning based on my understanding. Krugman's statement didn't make any sense to me based on data available from Kaiser and other sources.

It was interesting to note how many posters not only didn't agree with what you stated, but were offended by any challenge to Krugman's remark.

None of the same posters have thus far challenged the same refutal raised by Andrew Samwick as posted in the comments section of the follow up post. That's par for course, frankly. I thought it was time to add a bit of support from an economist to your side of the argument.

If any of the same posters do speak up further, it will be interesting whether they roll out more unsupported noise, or focus on substance in their follow up remarks on this issue.

Krugman has that point wrong in my opinion. But, I do look forward to further discussion on the matter.

[Merlin]

Being a French, I have to tread carefully here. But having spent the last 15 years in UK and Belgium, I must say that from my perspective the best theoritical system is probably the British one. It combines a no frill good quality tax financed system with the option to individuals to buy extra private insurance (queue jumping and extra frills essentially). It is definitely less wasteful (and hypocritical) than the French system with similar end results in terms of mortality, morbidity, etc..

It may be difficult for people to accept that some, usually the poorest or the weakest in society, cannot receive as good a treatment as rich ones, but I cannot see how we could avoid such a situation inasmuch as the difference lies in the access to the "hardware" part of healthcare: hip replacement, latest technologies, etc. which is really a scarce resource.

[anne]

Scarce resources, we have scarce resources; not so scarce are the scarce resources that we cannot find a way to make them scarcer by waging a tragic insane $2 trillion war in and occupation of Iraq, but we have scarce resources for, say, medical care. Imagine, resources are never scarce for, say, the insanity of Iraq, but always to scarce for, say, Grandma.

[No Dartmouth economist was harmed in making this comment; not that I would care a fig.]

[anne]

Heck, Tony Blair could always leave Iraq immediately and use the scarce resources to allow for British grandmas to, say, be able walk properly and painlessly. Say what?

Scarce resources, get those scarce resources before Iraq makes them scarcer. Say what? Grandma can always limp.

Keith says...

Actually, as Mankiw rightly pointed out, the idea has actually been floated in the past by noted Democratic policy economist Jason Furman. Here's the link: http://www.democracyjournal.org/printfriendly.php?ID=6466

And Krugman's being a bit dishonest here:

"Again, wow. No economic analysis I’m aware of says that when Peter chooses a good health plan, he raises Paul’s premiums."

Krugman must be wildly ignorant of health economics if he's never even heard of that analysis. One doesn't have to agree with it, but it sure as hell does exist in health economics, and has for a long time. Or, as Democrat Jason Furman put it:

"if your employer pays $1,000 in premiums to your insurance company, that money is effectively tax deductible to you. But if your employer raises your salary by $1,000 and you use the extra money to pay for medical bills, you generally will not get a tax deduction. As a result, many people end up with more-generous health insurance plans than they would otherwise choose to have. These plans have lower deductibles, lower co-payments, and lower co-insurance and are often focused around providing first-dollar coverage for routine medical expenses, rather than genuine insurance. As a result, individuals in the health system are often spending someone else’s money, which is never a recipe for cost consciousness. Unfortunately, ultimately it is not really someone else’s money: the cost is paid in higher premiums, which in tu