Good Government Health Care Not Actually So Good

In today's column, Paul Krugman says that "government involvement is the only reason our system works at all." He writes:

The key thing you need to know about health care is that it depends crucially on insurance. You don’t know when or whether you’ll need treatment — but if you do, treatment can be extremely expensive, well beyond what most people can pay out of pocket.

...So here’s the bottom line: if you currently have decent health insurance, thank the government.


The current insurance model is far from perfect—it insulates consumers from costs. Thus, patients typically don't know—and don't have any incentive to know—the price of medical care, and the market incentives that ought to tie spending to quality care end up distorted. Yet the private insurance market is not solely to blame for the country's care problems, and some of the problems the insurance market has can be traced back to government. Contrary to what Krugman argues, the government's involvement has made health insurance more expensive, and more cumbersome, and more wasteful.

One of the biggest problems with our current health-care system—that insurance is tied to employment—is a product of government intervention. Princeton economics professor Uwe Reinhardt explains:

At the time it was thought that, as the nation’s drafted military personnel risked their limbs and life on foreign battlefields at low, tightly controlled pay, those who stayed behind should have their wages controlled as well.

But with the wink of the eye with which Congress routinely puts loopholes into the tax laws or regulations it imposes, the wage controls imposed in World War II did not extend to fringe benefits. And thus, employer-paid fringe benefits, including employment-based health insurance, were born.


Nearly every reputable health-policy analyst agrees that excluding employer-provided health benefits is a bad idea—a massive market distortion that makes insurance less portable and more expensive. It's one of the biggest structural problems in the health insurance market. And it's a product of poor government policy.

Meanwhile, government-run health insurance programs like Medicare are, as Krugman notes later, quite popular. But they're not trouble-free. Far from it.

Medicare is rife with waste, fraud, and abuse, which has helped send its costs spiraling out of control. Controlling costs within government-managed health-care programs has proven nearly impossible. The recent Massachusetts initiative to provide universal health insurance to the state's residents has seen massive cost overruns. At the federal level, the Congressional Budget Office recently reported that spending growth on the government's two biggest health entitlements, Medicare and Medicaid, is the chief factor in putting our federal budget on an "unsustainable" path that has the potential to "cause substantial harm to the economy." Indeed, the potential for massive budgetary problems is a large part of the reason why Congress claims it's attempting to overhaul the health-care system.

Krugman would have his readers believe that, in health-care, government is the only good actor. But the evidence suggests otherwise. Thank the government? No thanks.

Shikha Dalmia wrote about the myth of free-market health care in America here. Read Reason's health-care archive here.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • ||

    Paul, you ignorant slut, your "right people" don't stay in charge forever.

  • ||

    Krugman still a moron, film at 11.

    -jcr

  • ||

    Fools! You are are fools! Don't you see that the government already has massive influence in health care and that the health care system is broken doesn't mean that the government has any responsibility for what's wrong with health care? It's the remain 30% they don't control! Those capitalists are screwing everything up! And when the government takes over 95% of the health care market, anything wrong will be the fault of the remaining 5%!

    And when the government takes over 100%, all failures will be because of Republicans and you libertarian quislings!

    I HAVE A NOBEL PRIZE! WHAT DO YOU HAVE?

  • jtuf||

    A case in point. My local county hospital charges $6 per pill for a multi-vitamin.

  • Jordan||

    Medicare: A $60-trillion deficit of success.

  • kilroy||

    Reminds me of this little bit of Douglas Adams hilarity:

    The argument goes something like this: `I refuse to prove that I exist,' says God, `for proof denies faith, and without faith I am nothing.'

    `But,' says Man, `The Babel fish is a dead giveaway, isn't it? It could not have evolved by chance. It proves you exist, and so therefore, by your own arguments, you don't. QED.'

    `Oh dear,' says God, `I hadn't thought of that,' and promptly vanished in a puff of logic.

    `Oh, that was easy,' says Man, and for an encore goes on to prove that black is white and gets
    himself killed on the next zebra crossing."

  • ||

    Yeah, I could of tell it wasn't going to be a great column when I read the opening paragraph ...

    At a recent town hall meeting, a man stood up and told Representative Bob Inglis to "keep your government hands off my Medicare." The congressman, a Republican from South Carolina, tried to explain that Medicare is already a government program - but the voter, Mr. Inglis said, "wasn't having any of it."

  • Porter||

    Krugs do you have some economics without the partisan slant? Then what good are you?

  • ||

    Every government program is popular among those who receive money from it. Social Security and Medicare are the most popular programs because they pay out money to the highest number of people.

  • g4m3th30ry||

    Porter -

    Krug doesn't even do economics anymore - only partisan slants, because if the economics of something don't prove him right, he'll lie anyway and say they do.

  • ||

    John Stossel is supposed to have a health care bit on 20/20 tonight (ABC). 'hoping my lack of cable, satellite, and antenna doesn't make me miss it.

    Speaking of, I wonder how many people who "can't afford health insurance" can afford cable and setellite? I'v known a few.

  • EscapedWestOfThebigMuddy||

    Come on, guys. The subtext of Krugman's piece is very clear:

    * having instant access to as much medical care as you need is the default state of existence
    * this is a right and should not be conditional on anything as crude as money
    * the other uses to which resources so used might have been put are irrelevant
    * the "success" of the system is to be judged only on the first two points

    The first point merely marks him as a rich man from a rich society. No surprise really. That describes the whole professional class in the States plus many tradespeople and merchants. It probably describes most of the participants in this forum.

    The rest are more problematic. They suggest that he doesn't really understand what goes into good medical care---the shear scope of the socio-economic apparatus behind the little room where the doctor meets you.

    Certainly, we don't actually know what a free market in health care would look like in this day and age, but we can make a good guess what a socialized system would look like, and I don't like it much.

  • ||

    Face it, libertarians. The free market in health care doesn't work. It was a miserable failure for all those years it existed. You used to have to get your teeth pulled by a barber! Why do libertarians want barbers to pull our teeth?

  • Jeff P||

    Krugman is giving a talk at the World Science Fiction Convention next week in Montreal. According to the program, his talk is on how reading science fiction made him an economist.

    Take from that what you will...

  • Tomcat1066||

    You know how Krugman got a Nobel Prize? Easy. Someone lost a bet.

  • ev||

    How the fuck DID this man win a Nobel? Everything that I've read by him is just seeped in Crazy.

  • Kyle Jordan||

    As I've said before, everything I've ever read from this damned fool is so incredibly stupid that it's sad.

    I simply do not care how supposedly sound this...man's...ideas and thoughts were that brought him the Nobel. He strikes me as nothing more than an incredible idiot who has far too many listeners/followers. The fact that this mental defective can attain the status he has is a testament to many of the things that are wrong with mankind.

  • Fluffy||

    Overwhelmingly, the number one complaint people have about their health insurance is its cost.

    The number of people angry about the cost of their health insurance easily dwarfs the number of people with complaints about horrific experiences where a life-saving treatment was denied or a genuine claim was denied.

    But Krugman credits government with forcing employers to provide policies that provide pool-based pricing that covers pre-existing conditions.

    Pool-based pricing and mandates to cover pre-existing conditions raise the premiums for the overwhelming majority.

    This means that if the number one complaint people have is the price of their insurance, this government action is one cause of that number one complaint.

  • ||

    The government may have created the loophole that allowed finge benefits such as health insurance flourish, but businesses welcomed it with open arms. With a relatively young, healthy workforce they found that it was much cheaper to provide insurance and pension plans than to pay employees enough to provide their own. This also helped retain employees because of the lack of portability.

    Now they find that providing these 'fringe' benefits costs a lot, so they want to drop them and go back on their promises without any commensurate increase in wages. That is one reason self insurance is so unaffordable for many. Combine that with the insurance industry's skill in denying people (who have been paying them for insurance through employer provided plans for years) continuing coverage, finding loopholes to avoid paying claims, and systematic denial of paying claims, and you have a need for a government option for health insurance.

  • ||

    I was watching the Daily Show recently and Krugman was on.

    My son said, "Dad, who is that?" I said "That is Paul Krugman, an well known economist and columnist for one the the largest newspapers in the world, a recent Nobel Prize winner, and a guy whose theories on international trade I studied while receiving my MBA."

    "Oh, so you like him."

    "No, he's pretty much an idiot."

    I have to admit, it felt weird saying those things back-to-back.

  • ||

    Looking for a solution here... what should happen in a free market system to someone who doesn't have health insurance at the moment, and, say, finds out that he has a heart defect and needs $250,000 worth of surgury? He can't pay for it. Who, if anyone, should (or would)?

    Does it come down to private charity? Will hospitals just eat the cost?

  • tarran||

    SDid he tell us to thank the government for annihilating medical care provided by fraternal organizations to their members too?

    Let me guess, he forgot to mention that little bit...

  • Jordan||

    The government may have created the loophole that allowed finge benefits such as health insurance flourish, but businesses welcomed it with open arms.



    Your whole post is one big wtf. You admit in your very first sentence that government is the cause of the problem and then spend the rest of your post saying that business is the problem and government is the solution.

  • ||

    Fluffy, good points at 2:16pm.

    I'm still staggered by people who want their health insurance to cover pre-existing conditions.

    I mean to say, isn't that sort of like wanting to buy a homeowners policy when your house is already on fire?

    There may be some justice in a program or a system to help people to pay for treatment of pre-existing conditions. But that something would not be insurance.

  • ||

    I do love him saying both:

    1. All healthcare is govt healthcare anyway

    and

    2. The current healthcare system is totally screwed up, so we have to give govt power to fix it.

  • AA||

    We know that Obama doesn't partake of the public education option that most people are forced into and that he supports whole-heartedly, Instead, he partakes of an expensive, exclusive option far out of the reach of most Americans.

    Would love to see a story comparing and contrasting his choice for his childrens' schooling against the potential future health care situation he proposes. Would he elect the public health insurance option for his family if it turns out as well as the public education option?

  • ||

    I suspect that the guy who said "keep your government hands off my Medicare" really meant "keep your government hands off my [health]care."

    It's pretty much that the guys stil a moran, but not for the reason Krugman thinks he is.

  • Rich||

    ... isn't that sort of like wanting to buy a homeowners policy when your house is already on fire?

    Or when your house has been repeated trashed by hurricanes?

  • ||

    Large numbers of people denied coverage for pre-existing conditions had insurance when the 'condition' first appeared. Perhaps we should hold those insurance companies liable for any continuing costs associated with that condition? That way people who develop a health problem wouldn't be denied coverage or priced out of the market, and the insurance companies could fight each other over when the obligation was incurred.

  • kilroy||

    "The government may have created the loophole that allowed finge benefits such as health insurance flourish, but businesses welcomed it with open arms. With a relatively young, healthy workforce they found that it was much cheaper to provide insurance and pension plans than to pay employees enough to provide their own. This also helped retain employees because of the lack of portability.

    Now they find that providing these 'fringe' benefits costs a lot, so they want to drop them and go back on their promises without any commensurate increase in wages."


    You do realize the government still provides a tax subsidy for people who get insurance through their employer don't you?

  • creech||

    Joe-D, if you and I and anyone else here who cares about said heart defect guy want to pay for his health care, we won't be stopped.

  • ||

    I'm sure the "public option" will be the same rousing success in the health insurance market as it has in the Florida property insurance market. Louisiana too.

  • ||

    I don't get the problem here. The proposal is nowhere close to a public government controlled system. Find out what's actually being debated before saying it's a bad idea. What it does do it slightly reduce the amount of control that insurance companies have over the system and holds them accountable because they wouldn't be the only game in town anymore. It's not a public system, it's a public alternative if you want it. If you want to stick with your coverage, do it. No obligation to move to the public option. What's the problem?

  • kilroy||

    Stu,

    Please read this from yesterday and get back to us.

  • ||

    Sug, I see you took the beer threads seriously.

  • ||

    If the insurance was in effect before the 'condition' first appeared, it wouldn't be a "pre-existing condition", would it?

    If their insurance was terminated or failed to pay for treatment, then it would be for some other reason in the terma of the policy or they would have some legal recourse.

    Again the problem you're talking about is sick people not being able to pay for medical treatment. If someone were to pay it wouldn't be something that could be reasonabley called "insurance", any more that someone paying to help the uninsured homeowner rebuild his burnt out house would be insurance. it would be welfare or charity or a loan, but not insurance.

  • ||

    It's not a public system, it's a public alternative if you want it. If you want to stick with your coverage, do it. No obligation to move to the public option. What's the problem?

    The problem is that there are too many Obamabots that can't think for themselves and resort to regurgitating tired campaign talking points.

  • ||

    My last post was addressed to rm2muv at 2:40pm.

    it sounds somewhat snarky but the intent is really to try to get people to address the semantics involved here.

  • ||

    At a recent town hall meeting, a man stood up and told Representative Bob Inglis to "keep your government hands off my Medicare."

    Shorthand for "don't take it away, don't cut my benefits". While I don't share The Krugger's optimism concerning govt care, I'll assume the other guy knows where his checks come from.

  • KingShamus||

    Paul Krugman is a tool. Here's proof, as if you needed it.

    http://kingshamus.wordpress.com/2009/07/29/wanna-see-a-liberal-dicknose-set-himself-up-for-a-fall/

  • The Angry Optimist||

    Stu - the problem is that people who want to maintain their private insurance plans will be taxed to support a public plan they do not want any part of. Think public schools - even though people use private schools, they have to pay for both services. That is your first problem.

    The second problem is that government involvement, a la Medicare, is what is driving up costs in the first place, because Medicare stiffs docs on claims, so docs make it up by overcharging on everything in the hopes of recovering lost profit. It is why tylenol is 20$ a pill in hospitals: because too many people, either indigents or Medicare beneficiaries, do not pay enough on other things. A public option will be that writ large.

    Finally, yo, it is just a moral issue: government has no business being involved with health care.

  • Naomi Klein||

    He strikes me as nothing more than an incredible idiot who has far too many listeners/followers.



    Whatever are you talking about?

  • ||

    It's not a public system, it's a public alternative if you want it. If you want to stick with your coverage, do it. No obligation to move to the public option. What's the problem?



    Florida's property insurance isn't a 'public system" either. Their's the state-owned Citizens Property Insurance Corporation alternative if you want it. If you want to stick with your coverage, do it. No obligation to move to the public option.

    The problem problem begins when state insurance regulators force insurers to charge lower premiums than risks dictate to some customers while charging others (inland residents) higher premiums while at the same time the state-owned Citizens Property Insurance Corporation is undercutting those insurers with even lower premiums.

    Alll of these decisions are being made for political rather than economic reasons and it's the exact same thing that will happen with Obamacare.

  • ||

    Revise end of second para to read:

    "...lower premiums with the deficit made up by dipping into the State Treasury."

  • ||

    Looking for a solution here... what should happen in a free market system to someone who doesn't have health insurance at the moment, and, say, finds out that he has a heart defect and needs $250,000 worth of surgury? He can't pay for it. Who, if anyone, should (or would)?

    Does it come down to private charity?


    Sure. Why not?

    Will hospitals just eat the cost?

    Many hospitals will do just that, as they are non-profits with a charitable mission. You'd be shocked at the number of poor uninsured people who get top-flight care from non-profit hospitals.

    If you force all hospitals to eat the cost, you will drive the for-profit hospitals from the market, and those costs will either (a) simply get passed on one way or the other or (b) hospitals will close.

  • The Angry Optimist||

    ah, there is also a BIG moral hazard argument with government run healthcare. I readily grant that the problem exists on a smaller scale with insurance, but when costs start spiraling out of control, people are going to become busybody health-nannies, because they are directly responsible (via taxes) for the choices you make, and they are going to get a big chip on their shoulder about what you eat, what you drink, who you sleep with and how much you exercise.

  • ||

    Large numbers of people denied coverage for pre-existing conditions had insurance when the 'condition' first appeared.

    [Citation needed]

    Perhaps we should hold those insurance companies liable for any continuing costs associated with that condition?

    Yes we should. If the condition wasn't truly a pre-existing condition, and the insured otherwise complied with the policy, then the insurance company violated its contract by cancelling coverage, and should be liable for damages.

  • ||

    I suppose the question is, what is the mechanism by which Medicare achieves lower total costs, and what would be the effect on that mechanism if the private space were swallowed by a government program? Note, the question is distinctly not "administrative costs" but total costs.

    We can say that Medicare imposes a maximum price for services, and that saves money. Except, what is the distortionary effect on the cost of private care? Is medicare responsible for a net decrease in medical costs that arises from efficiency and, er, negotiation, or is it just responsible for shifting prices around such that it looks cheaper than private plans because private plans have to pick up the slack resulting from the price cap?

    Be careful what you ask for Paul. Given the actual state of Medicare fraud and mismanagement, the fact that it is the source of a huge percentage of future fiscal distress, and that it is currently exporting part of its true cost into the numbers for the private sector you ridicule, I'm not so sure you really want people to look closely at this.

  • ||

    The future collapse of medicare (and social security) is grossly exaggerated, using projections that don't take into account certain relatively minor tax policy changes that could pick up the slack.

    Of course all the "shrink to drown in a bathtub" folks, with their stony moral purity (that relies on lying to people), raising taxes on the wealthy is just as out of the question as public healthcare. That of course won't stop them bitching about future costs.

    This article doesn't address Krugman's points at all. Mainly, that private health insurance markets alone don't work if your goal is to maximize access to health care coverage--they try to minimize it. The only reason as many people are covered as there are is due to government regulations that provide incentives for employers to provide coverage.

    The argument that all the problems in health coverage is government's fault--because if we go back in time far enough there is a connection between wage controls and the emergence of employer-provided plans, is absurd. The only reason health coverage is as widely available as it is, is because government has created certain policies that make it so. It's not efficient and doesn't cover everyone, but that's a reason to expand government's role, not eliminate it and leave everyone's health up to the bottom lines of insurance companies. Unless of course your moral priorities are seriously fucked up, but that wouldn't be the case with libertarians, no way.

  • ||

    I am a lefty when it comes to health care coverage. I believe it is necessary for all to have funded health care. That being said I have to ask Tony why we have to ignore the governments intrusion into healthcare as the source of high cost but we must acknowledge that govts role is the source for more people being covered. Am I missing something again?

  • ||

    Because it sounds like your saying this: ben stuck his hand in my apple pie, making it taste like shit. Hey ben, try sticking your other hand in it. Maybe then it will taste better.

  • ||

    I don't agree that government is responsible for high health care costs. Health care is expensive on its own. Add to that the other side of the private provider equation: the actual providers leeching off of insurance companies (we'd need to restructure incentives so that doctors aren't providing unnecessary care because it is expensive). Government programs are actually more efficient than the private sector because administrative costs aren't multiplied over many providers, and it's non-profit.

  • ||

    Tony erred, "The argument that all the problems in health coverage is government's fault--because if we go back in time far enough there is a connection between wage controls and the emergence of employer-provided plans, is absurd."

    The argument that all of the inane postings we must endure with Tony's byline are the fault of his parents, because if we go back far enough in time there is a connection with them doing the nasty and Tony popping out around 10 months later, is absurd.

    It is a fact that government wage and price controls set us on our current path. It is a fact that government's perpetuation of the tax favorability of the employer-provided insurance model perpetuated and helped to proliferate this model throughout society. It is a fact that the establishment and enhancement of Medicare enshrined the "insurance" model as the dominant means to access health care; that the HMO Act cemented insurance company hegemony (with government pulling the strings) over the part of health care not directly controlled by the government; and that HIPAA asserted and largely achieved government control of medical information. This is a strong line of "begetting" that ends with government directly or indirectly in control of the lion's share of the health care industry. And it all had to start somewhere. It is not absurd to try to identify the likely point of departure from sanity. We do it because we believe that the effort will help us distinguish the good things that we left behind from the bad things we acquired on the way -- the better to dispense with the latter. Also because recognizing a "starting point" helps us to understand the location of the faulty foundation, which we need to jackhammer.

  • Mike Laursen||

    Krug doesn't even do economics anymore - only partisan slants, because if the economics of something don't prove him right, he'll lie anyway and say they do.

    Yeah, but why doesn't he at least dress up his partisan slants in a lot of arcane economic jargon? If there's anything worse than a political hack, it's a lazy political hack.

  • Fluffy||

    Yes we should. If the condition wasn't truly a pre-existing condition, and the insured otherwise complied with the policy, then the insurance company violated its contract by cancelling coverage, and should be liable for damages.

    RC Dean, I don't think you fully understood that guy's point. It's obscure, but after a couple of readings I saw it.

    He's saying that people with pre-existing conditions had insurance with company "A" when their condition was discovered. For one reason or another [job loss, maybe] they don't have that insurance any more and want to get insurance with company "B", but they can't get it because company "B" doesn't want to cover their pre-existing condition. So he was asking us if we think company "A" should be forced to cover that person's costs in perpetuity, even though that person no longer is a subscriber of company "A".

  • ||

    """Speaking of, I wonder how many people who "can't afford health insurance" can afford cable and setellite? I'v known a few."""

    Know anyone pays $350 a month for cable? What do you mean you can't afford a Lamborghini, you can afford a toyota!!!!

    There is no easy solution with health care. The most straight forward free market approach would be to end insurance companies, have people out of pocket. If someone sets their rates to high they won't get customers unless they lower their rates. But hardly anyone would go for that. Neither the health care industry nor the customers would like that idea.

    The health care industry grossly over values their service, and the people don't really want to pay for the services they receive.

  • ||

    Tony erred again, "I don't agree that government is responsible for high health care costs. Health care is expensive on its own. Add to that the other side of the private provider equation: the actual providers leeching off of insurance companies (we'd need to restructure incentives so that doctors aren't providing unnecessary care because it is expensive)."

    Government is responsible for high health care costs because it has so thoroughly eliminated or distorted the market forces that otherwise would have served to keep costs down. As an example that is pertinent to Tony's comment, Medicare (and by now, basically all health plans) pay by procedure. Doctors don't provide "unnecessary care because it is expensive." Like everyone, Doctors want to get paid. But under the current, government-created-and-enabled system, doctors must perform billable procedures in order to get paid. This means that everyone is angling to make sure that one of his or her procedures ends up on the bill. If the procedure can be expensive, so much the better, but that is not the primary goal, which is simply to get slices, however big or small, of as many pies as possible. Conversely, if you the MD or lab are not getting paid, this means that your procedures have not been deemed medically necessary, much less essential. One way that doctors and labs justify the necessity of their procedures is as a way of "covering all the bases," which also just happens to help to avoid malpractice allegations and lawsuits against the insurance companies. So the patient receives a package of services (procedures), each of which is performed by a different provider, and the collection of which is deemed "proper, cautious care" that is both medically necessary and insulates the practitioners and insurance companies from litigation (or discipline from Medicare or similar agencies).

    Medical billing is so complex BECAUSE of the procedure-based regimen that government established, and that the insurance companies who occupy a favored position because of government embraced (or were forced to accept or be cut off from Medicare resources).

  • Fluffy||

    I don't agree that government is responsible for high health care costs. Health care is expensive on its own. Add to that the other side of the private provider equation: the actual providers leeching off of insurance companies (we'd need to restructure incentives so that doctors aren't providing unnecessary care because it is expensive).

    Well, if health care is too expensive, this is at least partially [and probably mainly] due to the fact that government provided demand support for it for 60 years.

    This is one way in which Krugman is correct: government involvement in health care made it "better" in the sense that the flood of money thrown at health care due to the demand support the government has provided accelerated the rate of technological development in health care beyond what pure market forces would have produced. Health care advanced more than it would have "organically", and thus consumes more resources per capita than it would have without that unnatural rate of development.

    This is a great thing if you get one of the advanced treatments that would not exist yet if the rate of technological advance had not been artificially stimulated.

    But it's a bad thing if the only reason the spending supporting the entire industry was only possible because of unique demographic conditions following the Second World War that will never come back. It would be as if the government had spent massively to support space research, and had spent decades promising everyone that each and every one of us would get our own trip to the moon - and then woke up one day and said, "Oh shit, how do we pay for all these promises we made? Oh shit, if this technology didn't exist, nobody would expect the ride to the moon we promised, but because of all the money we spent the technology does exist, so the only way out of our promise is to say 'Fuck you, you don't get to go to the moon after all'. And how are we going to get away with that?"

  • The Angry Optimist||

    Government programs are actually more efficient than the private sector because administrative costs aren't multiplied over many providers, and it's non-profit.



    Ooooh, do you want to know how dishonest Tony is? This has been refuted over and over and over and over...and yet he repeats it. The magical invocation of "administrative costs" is how you know you are dealing with someone who has no clue what they are talking about.

  • ||

    What is true: if the goal is every medical need for every American has to be funded without causing a burden to anyone at any level of low income, a purely private solution will not work.

    What is not true is that this requirement is answered by insurance. Insurance requires that I pay premiums commensurate with my risk of needing care. Insurance policies can be structured to be favorable for different lifestyles who incur different risks. This national healthplan idea is not insurance - it is a welfare plan. This is an important distinction because if you insist on comparing private insurance to a welfare plan and only look at the beneficiary of the welfare payment's side of things, well, yeah, it's easy to see why you'd prefer the welfare plan.

    The problem with the welfare plan isn't that it compares to private insurance in this or that way, the problems with it are the same you have with any welfare plan: it increases use, it does not contain costs, it crowds out private innovation, it creates a wall between the beneficiary and the payor, it is prone to fraud and mismanagement, it doesn't capitalize on local knowledge, and that's just off the top of my head.

    So, okay, many Americans want a degree of health coverage for all Americans. The question is how to maximize that guarantee in the context of overall health outcomes. If you make the guarantee too big or too flexible, you have a cost problem. If you impose cost controls, you've destroyed market incentive for innovation. Adults should be able to talk about these tradeoffs. Maybe we have a guaranteed minimal benefit that is means tested supplemented by privately purchased catastrophic care and HSAs or something, but we can't have that discussion while the obamacare mantra is that a national plan does everything and has no costs.

  • The Angry Optimist||

    Amen!! to Jason.

    Why is a means-tested option off the table? Oh, yes, that's right, it's called Medicaid, and the only reason you see the constant sob stories about the middle class is because the poor are already covered.

    Serious question: if you take insurance, Medicare and Medicaid, how many Americans actually DO have health care coverage?

  • tarran||

    Here is the article that guys like Tony and Krugman are ignorant of:


    Eighty years ago, Americans were also told that their nation was facing a health care crisis. Then, however, the complaint was that medical costs were too low, and that health insurance was too accessible. But in that era, too, government stepped forward to solve the problem. And boy, did it solve it!

    In the late 19th and early 20th centuries, one of the primary sources of health care and health insurance for the working poor in Britain, Australia, and the United States was the fraternal society. Fraternal societies (called "friendly societies" in Britain and Australia) were voluntary mutual-aid associations. Their descendants survive among us today in the form of the Shriners, Elks, Masons, and similar organizations, but these no longer play the central role in American life they formerly did. As recently as 1920, over one-quarter of all adult Americans were members of fraternal societies. (The figure was still higher in Britain and Australia.) Fraternal societies were particularly popular among blacks and immigrants. (Indeed, Teddy Roosevelt's famous attack on "hyphenated Americans" was motivated in part by hostility to the immigrants' fraternal societies; he and other Progressives sought to "Americanize" immigrants by making them dependent for support on the democratic state, rather than on their own independent ethnic communities.)




    "Lodge practice" refers to an arrangement, reminiscent of today's HMOs, whereby a particular society or lodge would contract with a doctor to provide medical care to its members. The doctor received a regular salary on a retainer basis, rather than charging per item; members would pay a yearly fee and then call on the doctor's services as needed. If medical services were found unsatisfactory, the doctor would be penalized, and the contract might not be renewed. Lodge members reportedly enjoyed the degree of customer control this system afforded them. And the tendency to overuse the physician's services was kept in check by the fraternal society's own "self-policing"; lodge members who wanted to avoid future increases in premiums were motivated to make sure that their fellow members were not abusing the system.

    Most remarkable was the low cost at which these medical services were provided. At the turn of the century, the average cost of "lodge practice" to an individual member was between one and two dollars a year. A day's wage would pay for a year's worth of medical care. By contrast, the average cost of medical service on the regular market was between one and two dollars per visit. Yet licensed physicians, particularly those who did not come from "big name" medical schools, competed vigorously for lodge contracts, perhaps because of the security they offered; and this competition continued to keep costs low.



    The high cost of routine medical care is entirely thanks to activist government of the sort championed by Krugman and Tony. And every generation of Tony/Krugmans act shocked, (or blame reactionary speculators) when the latest round of interventions fuck the common man further.

  • ||

    Thanks, Fluffy.

    So he was asking us if we think company "A" should be forced to cover that person's costs in perpetuity, even though that person no longer is a subscriber of company "A".

    Got it. Although my answer is the same: what does the contract say? Does it say it will provide for continuing care for conditions that began treatment during the policy term? If not, then, not.

    Of course, this problem has already been addressed by Our All-Wise Masters in DC. People forget that HIPAA stands for Health Insurance Portability and Accountability Act. The basic rule is that you can't be excluded for a pre-existing condition that hasn't needed treatment (or at least been treated) for the last six months, but of course it is hideously more complicated than that.

    If you're not happy with the way this works, then take it up with Our All-Wise Masters in DC; the current situation is of their making.

  • ||

    Serious question: if you take insurance, Medicare and Medicaid, how many Americans actually DO have health care coverage?

    No, the real question is, how many Americans actually have coverage available to them, either through their employer, Medicare, or Medicaid.

    Because the majority of the uninsured are that way by choice. They either declined their employer plan, or haven't signed up for Medicaid even though they are eligible. As for the latter, why should they sign up? There's no pre-existing condition exclusion for Medicaid, so you might as well wait until you're really sick, right?

  • ||

    And the tendency to overuse the physician's services was kept in check by the fraternal society's own "self-policing"; lodge members who wanted to avoid future increases in premiums were motivated to make sure that their fellow members were not abusing the system.

    Thus illustrating the superiority of institutions founded in civil society rather than the state.

  • ||

    TrickyVic wrote, "There is no easy solution with health care. The most straight forward free market approach would be to end insurance companies, [and] have people out of pocket. If someone sets their rates to[o] high they won't get customers unless they lower their rates. But hardly anyone would go for that. Neither the health care industry nor the customers would like that idea."

    Who is this "industry" you speak of? The industry is made up of tends of thousands of individual practitioners and vendors of medical supplies. All each of them wants to do is get a good return on their years of investment in education and training -- they want to get paid for providing services that help people. Show them how to get paid in a way that doesn't involve running the rat's maze of twisty hallways inside the existing bloated edifice, and they will like it more than well enough.

    What we don't need is the heavy hand of government sweeping away practitioners' attempts to free themselves from the dysfunctional system. A doctor in NY, for example, recently tried to establish a subscription-based practice (think Netflix or 24Hour Fitness for medical services) aimed at "the uninsured," who would pay out-of-pocket, and was told that he couldn't do that because he was in effect "selling insurance" without being a licensed insurance company. WTF??? Patients seemed to like his approach more than well enough, and he was certainly an experienced, licensed, completely legitimate MD; by what proper authority does the government say, "no, you can't provide your services on your own terms, which patients voluntarily accept?"

    Clearly, there would be vested interests who would fight the transition to a true free-market situation. But it is NOT a foregone conclusion that they would be successful, that they wouldn't be forced to accept and embrace (or at least adapt to) an approach that was more responsive to patient needs and abilities to pay. Before blaming the "free-market" for our woes, we should at least give the free-market a fair chance to address them.

  • Fluffy||

    JasonL has an excellent point.

    If what is really needed is a welfare plan and not an insurance plan, let's just admit it and have a welfare plan.

    But we should fold that welfare plan - and every other welfare scheme out there, including food stamps, section 8 housing, social security, etc. - into the earned income tax credit program.

    Set a minimum income by family size and use the earned income tax credit to achieve it.

    This is the most unlibertarian thing I have ever proposed, but it would accomplish a few things:

    1. It would prevent the government from destroying entire sectors of the economy [like health care] because the voters want to provide welfare to poor people with no insurance, but don't want to call it that. Give the poor people money and let them buy their own damn insurance.

    2. It would immediately cut the number of employed federal bureaucrats by a huge percentage and would essentially render everyone with a Masters in Social Work unemployable, because every federal department that administers the complex programs designed to micromanage the behavior of the poor in exchange for delivering benefits to them would disappear. These bureaucrats would no longer be around to empire build and advocate for increased spending for their programs and departments, either.

    3. It would give government programs a single neck that we could cut later.

  • ||

    fluffy, the immediate reaction to your plan would be a huge public outcry of "RACISM" at which point the politicians would decide that it's a bad plan.

  • Fluffy||

    fluffy, the immediate reaction to your plan would be a huge public outcry of "RACISM" at which point the politicians would decide that it's a bad plan.

    Well there's an objection I hadn't anticipated.

    How would they say it was racist?

  • The Angry Optimist||

    No, the real question is, how many Americans actually have coverage available to them, either through their employer, Medicare, or Medicaid.



    Frankly, I consider those people "covered" - not in the traditional sense, mind, but in the sense that, when talking about new programs, those people are already covered by the umbrella of a program - not our fault if they choose to get wet.

    And for my money, does anybody else blink when they throw up that "46 MILLION ZOMG!" - because, doesn't that mean that over 85% of the country is covered? So we have to toss out the greatest healthcare system in the world for a lousy 15% of people?

  • ||

    Fluffy, welfare, food stamps, sec 8 housing are seen as benefits predominantly given to blacks and hispanics. and remember, shouters don't have time for pesky statistics.

  • Fluffy||

    Fluffy, welfare, food stamps, sec 8 housing are seen as benefits predominantly given to blacks and hispanics. and remember, shouters don't have time for pesky statistics.

    Right, but instead of rent vouchers and a Medicaid card and stamps that let you buy approved foods, we would give all those black and hispanic people cash on the barrel.

    Frankly, we should accuse anyone who prefers the existing system to a guaranteed minimum income system of racism, because they don't trust poor, dark-skinned people with cash, who they accuse of being dumbies who will "blow it all on smokes and grape soda".

    "You damn racist social workers!"

  • Fluffy||

    Does anyone know where I can get a copy of the federal budget that splits out the spending of the various departments in a way that would let me segregate spending that makes it to citizens from spending that goes to maintaining the organizational chart of the department itself?

  • ||

    fluffy,I wonder what the dollar figures would be to use a plan like yours instead of the current clusterfuck. Anybody?

  • ||

    So we're all agreed that a true single-payer system is the best solution? I'm not dead against the idea that somehow, some time, government is ultimately responsible for high costs. But that doesn't lead ipso facto to the conclusion that government should butt out and everything will be OK. Seems like we're agreed that having private insurance as middlemen jacks up costs. I'd much prefer Truman had been able to set up single payer, ridding us of the less efficient system in which employers replace wages with insurance.

  • The Angry Optimist||

    No, Tony. Now run along - your complete and total inability to read is starting to royally irritate me.

  • The Angry Optimist||

    Wait Tony, I take that back - let us agree that there should be no employer tax incentives that favor bennies over cash. Can we at least agree on that?

  • ||

    And TAO,

    Just because the Heritage Foundation propaganda mill says it has debunked the idea that medicare is more cheaply run than private systems doesn't mean it's true. All evidence suggests that single payer plans have lower administrative costs than private insurers. If you compare them with systems in other countries, the evidence is even clearer.

  • ||

    TAO,

    I think we can agree that sticking employers with providing necessary services is bad on several levels, yes. Healthcare should be available whether you're employed or not, and the job market would be freer if people were able to ship for jobs without having to worry about losing coverage.

  • ||

    shop*

  • The Angry Optimist||

    you don't even know what you mean when you say administrative costs, Tony. You barely pass the Obamabot Turing Test.

  • ||

    TAO,

    Well whatever they are, the CBO puts it at 2% of expenditures for public medicare and 11% for the private medicare advantage plan (which is a way of comparing apples to apples--both cover the same types of people).

  • The Angry Optimist||

    So? Hey, guess what Tony - I pay that 2%. I do not pay that 11%.

    Guess which one I prefer be "implemented"?

    And if you really want to lower costs, introduce competition. No more "in state only" requirements; no more government-constructed monopolies. no more government failing to pay its bills (looking at you, Medicare claims processor). No more tax breaks for health insurance.

  • Rich||

    ... the voters want to provide welfare to poor people with no insurance, but don't want to call it that.

    What if they call it "Well-fair"?

  • ||

    TAO,

    If you get sick you sure as hell do pay for that 11%. Government doesn't have to spend money on advertising or various ways to deny coverage in the service of profit.

  • The Angry Optimist||

    advertising? gah, that old canard again.

    Tony, single-payer does not work. It really is just that simple. you only have to look to our neighbors to the north to see that. Some of them wait 1-2 years to see a primary care physician. More of them wait on simple things like blood tests.

    Sorry, Tony, but I am not buying what you're selling. Probably ever.

  • The Angry Optimist||

    If you get sick you sure as hell do pay for that 11%.



    By choice, I do. I also go to my civilian physician instead of going to the VA. Wanna guess why?

  • Fluffy||

    Tony,

    If the reason that private insurers spend 11% on administrative costs is because, as you claim, they are employing hordes of people to figure out how to prevent people from consuming care, then Medicare is probably not "cheaper" for the taxpayer even at 2%.

    If the marginal savings on reduced spending on care outweighs the dollars spend on administrative [and it must, or the insurers wouldn't spend it] then the taxpayer will lose money, not gain it, by applying Medicare's administrative model to the public as a whole.

  • ||

    This is second hand info at best. When we lived in Idaho we used to see a doctor that was trying to change the medicaid system in Idaho from the inside. His claim was that in about '86 or '87 (i don't remember the year ) 73% of medicaid dollars in Idaho were spent on administration. I wouldn't know where to begin to look to verify this but it seems very high to me. I am curious how that figure, if accurate, would compare to a private insurer.

  • ||

    Talk about canard... oh the horrors of the Canadian system. Have you ever asked a Canadian if they'd prefer the American system over their own? Are all the advanced countries in the world simply insane for having adopted some type of universal public plan instead of the US's?

  • ||

    Tony - yes, all the 'advanced' nations that have adopted single-payer systems are insane. correct me if i'm wrong, but you don't live in one of them, do you?

  • ||

  • ||

    "Are all the advanced countries in the world simply insane for having adopted some type of universal public plan instead of the US's?"

    They are not insane, but you have to look carefully at why. What percentage of global medical R&D is paid for by Canadian consumers? French? English? How about the US?

    The bottom line is that other countries have deployed strategies that look very cost effective because they are bearing almost no burden of development. Yes, yes, fundamental molecular research is done via taxpayer funded universities even in the US, but none of those wholly public systems produce even a small fraction of the deployable treatments that the private sector does, and global private innovation is driven overwhelmingly by profit generated in the US market. It sucks, but think twice before you rectify the situation by either a) increasing the costs of all those systems you are holding up as more efficient or b) sacrificing well over half of all innovation dollars in the world.

  • Fluffy||

    Brotherben,

    I looked up figures for the 2008 budget, which were the latest figures available. I also looked up data for income by household split into increments of $2500 to get some idea of exactly how many households would need how much income support.

    Here's what I discovered:

    If we got rid of all Department of Health and Human Services, HUD [except for the lead paint reduction initiative, which I guess we can keep], the Department of Labor except for OSHA, BLS, and the Mine Safety Board, the Department of Commerce [the Patent Office stays open because it breaks even on fees], the Department of Energy except for the nuclear waste control spending, the Food and Nutrition Service at the Department of Agriculture [i.e. Food Stamps], and the Social Security spending that goes to the disabled as Supplemental Security Income, we would save enough money to raise the incomes of all households with an annual income below $36,600 to the $36,600 level.

    And that's for an average household size of 2.5 people.

  • Fluffy||

    Actually, brotherben, I made one mistake:

    They hid the spending for the existing earned income tax credit in the Department of the Treasury's budget. If I add that spending in, the minimum income can be set at $37,500 per household. With an average household size of 2.5 people, that would mean that household A with 2 adults would be at $35000, and household B with 2 adults and 1 child would be at $40000.

    Households with that income can get their own health insurance, their own housing and everything else.

    I think Milton Friedman was onto something here.

  • The Angry Optimist||

    Fluffy - would that not assume that you are breaking up the dollar amounts evenly among American households? I mean, the wealthy pay more taxes, so they would get the largest (amount, not percentage) of the cuts.

  • Fluffy||

    TAO,

    I was looking at expenditures. I gathered up all the expenditures that basically amount to one variety or another of poverty relief, and I said, "Let's get rid of all these programs, put the money in a big pile, and figure out what that would let us set the minimum household income at if we dumped it all into an Earned Income Tax Credit type program."

    Basically, Medicaid, Food Stamps, Section 8 rental housing vouchers, etc. all disappear, but no one has an income low enough to qualify for them anymore net of the new superEITC anyway.

    The wealthy get nothing because only households with incomes below the minimum level get anything.

  • ||

    Thanks Fluffy. The question that remains is what effect it would have on the economy to get rid of all those agencies and jobs.

    disclaimer: I get SSI and have dealt with the soc sec admin many times. You could fire the whole damned bunch as far as I'm concerned. It's the most maddening entity I've ever had to deal with. I'd rather be in a cave with Lefiti and lonewhacko for eternity with them having a neverending supply of meth than try to understand the soc sec folks.

  • ||

    "...and the people don't really want to pay for the services they receive."

    Let's see how easily you can fork over $30,000 in back surgery costs after an injury.

    Some of us just declare bankruptcy, since that is pretty much all that's available when your uncovered medical bills are in the multiple tens of thousands of dollars.

  • Michael Ejercito||

    Looking for a solution here... what should happen in a free market system to someone who doesn't have health insurance at the moment, and, say, finds out that he has a heart defect and needs $250,000 worth of surgury? He can't pay for it. Who, if anyone, should (or would)?


    Two options:

    He should live with the heart defect or,

    You (and I mean you , not I) should pay for it.

    Of course, he would not fare better in a socialized system, since heart surgery will always be hard to come by (that is why it is so expensive in the first place).

  • Kreel Sarloo||

    Some of us just declare bankruptcy, since that is pretty much all that's available when your uncovered medical bills are in the multiple tens of thousands of dollars.



    Interesting default. And interesting priorities. I would like to think that people would feel under some obligation to pay their bills.

    Purely anecdotal, but most of the people I've known who are stuck with bills like this were quite capable of paying for insurance but simply decided to spend the money on other things.

    None of them ever pled poverty when it came to taking on a new $500 a month car payment.

  • Michael Ejercito||

    Are all the advanced countries in the world simply insane for having adopted some type of universal public plan instead of the US's?


    You seem to forget why those countries adopted single-payer plans.

    It is because their health care systems had been bombed to rubble during World War II . Howard Dean admitted this.

    Read this post .

    "Under the 'voluntary medicare' system, the people who went for
    medicare would be people who couldn't get insurance from private
    insurers. They would cost more per person, so the medicare would cost
    more per person."

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Progressive Puritans: From e-cigs to sex classifieds, the once transgressive left wants to criminalize fun.
  • Port Authoritarians: Chris Christie’s Bridgegate scandal
  • The Menace of Secret Government: Obama’s proposed intelligence reforms don’t safeguard civil liberties

SUBSCRIBE

advertisement