November 09, 2007

Paul Krugman, economist and columnist for the New York Times, has a column today that is a rebuttal, of sorts, to Gregory Mankiw's Sunday Times column.

Krugman is, as always, a model of reasoned argument and restraint. Wait, who am I kidding?

Take this analysis:

We're told, for example, that there really aren't that many uninsured American citizens, because some of the uninsured are illegal immigrants, while some of the rest are actually entitled to Medicaid. This misses the point that the 47 million people in this country without insurance are an ever-changing group, so that the experience of being without insurance extends to a much broader group - in fact, more than one in every three people in America under the age of 65 was uninsured at some point in 2006 or 2007.

Oh, and finding out that you're covered by Medicaid when you show up at an emergency room isn't at all the same thing as receiving regular medical care.

Actually, the point made made Mankiw and others is exactly that: the uninsured aren't a homogenous group; many are young healthy, and relatively affluent, and could afford to buy health insurance if they could find a reasonably priced product that fit their needs. Thanks to many burdensome and expensive state regulations, they can't. This isn't a problem with the private system, but a distortion of the tax system and state regulations. And the EMTALA regulations that require hospitals to treat anyone who shows up on their doorstep discourage people from buying health insurance or signing up for public programs like Medicaid.

Krugman goes on.

Excuse No. 2: It's the cheeseburgers.

There's a grain of truth to this claim: Bad habits may partially explain America's low life expectancy. But the big question isn't why we have lower life expectancy than Britain, Canada or France, it's why we spend far more on health care without getting better results. And lifestyle isn't the explanation: the most definitive estimates, such as those of the McKinsey Global Institute, say that diseases that are associated with obesity and other lifestyle-related problems play, at most, a minor role in high U.S. health care costs.

This is as close to Krugman gets to being fairminded. He admits their might be a "grain of truth" to the arguments about teenage preganancy and other issues affecting life expectancy, without deigning to engage any of the actual research. And he still derides the argument by saying "its just the cheesburgers."

What's his solution? Reign in the "huge overhead of America's private health insurance companies". Huge overhead?

Well, what does the McKinsey study he loves to quote actually say about administrative costs? It finds "excess" administrative costs in the U.S. of $98 billion, of which $14 billion is attributable to public programs (a fact that Krugman ignores entirely).

For those of you keeping count, that means the private sector, if you agree with McKinsey, accounts for $84 billion in "excess costs". That amounts to exactly 4.2% of the U.S.'s $2 trillion health care budget. And, as my colleague Ben Zycher explains, much of that cost goes towards activities highly valued by consumers and the market at large.

It should also be noted that there are enormous spending variations in Medicare from state to state, and even hospital to hospital, which do not correlate to quality; if anything, Medicare ought to be spending a lot more money on administrative costs than it is doing today.

Krugman's last point:

Excuse No. 4: Socialized medicine! Socialized medicine!

But the best way to counter scare talk about socialized medicine, aside from swatting down falsehoods - would journalists please stop saying that Rudy's claims, which are just wrong, are "in dispute"? - may be to point out that every American 65 and older is covered by a government health insurance program called Medicare. And Americans like that program very much, thank you.

Rudy is a big boy; and the cancer stats speak for themselves, as David Gratzer explains in this week's Spotlight article.

Comparing France and Germany, the "best of the foreign health care systems", to the U.S. is just disingenous. The U.S. isn't either country, and our populations and political systems are very, very different. It is just not an apples-to-apples comparison. And Krugman has nothing to say about the U.S.'s leading role in global medical innovation.

We should also note that although Medicare is popular, Americans are also very fond of their private insurance coverage. And Medicare isn't like any of the programs in socialized countries that Krugman loves. It doesn't have a global spending budget - and has massive unfunded liabilities as a result.

If Krugman really wants to slash U.S. health care spending, the first place he'll have to start is in Medicare. Let's see how "satisfied" seniors are with that.

Posted by Paul Howard at November 9, 2007 10:11 AM

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