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Monday, January 16, 2006

Paul Krugman: First, Do More Harm

Paul Krugman continues his series on health care reform. This column focuses on diabetes to illustrate some of the bad incentives built into our current health care system and the administration's health care reform proposals:

First, Do More Harm, by Paul Krugman, Commentary, NY Times: It's widely expected that President Bush will talk a lot about health care in his State of the Union address. He ... probably will tout proposals for so-called "consumer driven" health care. So it's important to realize that the administration's idea of health care reform is to take what's wrong with our system and make it worse. Consider ... the rising tide of diabetes. Diabetes is a horrifying disease. It's also an important factor in soaring medical costs. ... And the problem of dealing with diabetes is a clear illustration of the real issues in health care.

Here's what we should be doing: since the rise in diabetes is closely linked to the rise in obesity, we should be getting Americans to lose weight and exercise more. We should also support disease management: people with diabetes have a much better quality of life and place much less burden on society if they can be induced to monitor their blood sugar carefully and control their diet.

But ... the U.S. system of paying for health care doesn't let medical professionals do the right thing. There's hardly any money for prevention... And even disease management gets severely shortchanged. ... insurance companies "will often refuse to pay $150 for a diabetic to see a podiatrist, who can help prevent foot ailments associated with the disease. Nearly all of them, though, cover amputations, which typically cost more than $30,000." ... The point is that we can't deal with the diabetes epidemic in part because insurance companies don't pay for preventive medicine or disease management...

Which brings us to the Bush administration's notion of health care reform. The administration's principles ... were laid out in the 2004 Economic Report of the President. The first and most important of these principles is ... insurance policies - "that focus on large expenditures that are truly the result of unforeseen circumstances," as opposed to small or predictable costs. ...

The ... administration is saying that we need to make sure that insurance companies pay only for things like $30,000 amputations, that they don't pay for $150 visits to podiatrists that might have averted the need for amputation. To encourage insurance companies not to pay for podiatrists, the administration has turned to its favorite tool: tax breaks. The 2003 Medicare bill ... allowed people who buy high-deductible health insurance policies - policies that cover only extreme expenses - to deposit money, tax-free, into health savings accounts that can be used to pay medical bills. Since then the administration has floated proposals to make the tax breaks bigger and wider...

Critics of health savings accounts have mostly focused on two features of the accounts Mr. Bush won't mention. First, such accounts mainly benefit people with high incomes. Second, they encourage wealthy corporate employees to opt out of company health plans, further undermining the already fraying system of employment-based health insurance.

But the case of diabetes and other evidence suggest ... a third problem with health savings accounts ... in practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase. ... The bottom line is that what the Bush administration calls reform is actually the opposite. Driven by an ideology at odds with reality, the administration wants to accentuate, not fix, what's wrong with America's health care system.

Previous (1/2) column: Paul Krugman: No Bubble Trouble?
Next (1/19) column: Paul Krugman:  The K Street Prescription

    Posted by on Monday, January 16, 2006 at 12:21 AM in Economics, Health Care | Permalink  TrackBack (0)  Comments (20)

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