The American Spectator

Media Matters

Paul Krugman is up to his socialized-medicine-advocacy ways again. Not surprisingly, Krugman has nothing original to say; his recent column is little more than a distillation of all the leftist talking points on health care.

According to Krugman, we can't deal with the current health-care crisis because it is "ideologically inconvenient." Indeed, "To get effective reform...we'll need to shed some preconceptions -- in particular, the ideologically driven belief that government is always the problem and market competition is always the solution." Krugman gives us a hint as to what "effective reform" looks like: "If we don't want to become a society in which the rich get life-saving medical treatment and the rest of us don't, we'll have to pay much higher taxes." Most unnerving was his comment that, "In health care, competition and personal choice can and do lead to higher costs and lower quality." In other words, we need a one-size-fits-all health care system in which bureaucrats and politicians make our choices for us.

Krugman advances the silly notion that rising health care spending is due to innovation:

Rising health care spending isn't primarily the result of medical price inflation. It's primarily a response to innovation: the range of things that medicine can do keeps increasing. For example, Medicare recently started paying for implanted cardiac devices in many patients with heart trouble, now that research has shown them to be highly effective. This is good news, not bad.

Innovation has little to do with it. Rather, the factors are increased wealth and the third-party payer system. As a society grows wealthier, individuals are willing to pay more for health care as a way to protect their wealth. We spend more on health care here because we have the freedom to do so. Other developed nations have government-run systems that ration health care resources and often restrict how much individuals can spend on their own. When given the chance, they too spend more on health care. Witness the number of Canadians who pay for treatment out of their own pockets -- by coming to the U.S.

The other reason we spend as much as we do on health care is most health insurance is based on the third-party payer model. Under this model, the cost of medical care is not paid by the patient but by other people's money, a "third party" insurance company or government program. When patients do not pay the cost directly, they mistakenly perceive that they are getting health care for free. Under those conditions they have no incentive to restrain spending.

The third-party payer system is the result not of the free-market, but of government policy. The tax code gives an exemption for the purchase of health insurance to employers, not employees. Thus, employees are shielded from most of the cost of health insurance. A system that gives the tax credit to individuals would do much to bring market pressures to bear on the health-care system.

The next myth Krugman endorses is that U.S. health care is worse than those of other developed countries:

Finally, the U.S. health care system is wildly inefficient. Americans tend to believe that we have the best health care system in the world. (I've encountered members of the journalistic elite who flatly refuse to believe that France ranks much better on most measures of health care quality than the United States.) But it isn't true. We spend far more per person on health care than any other country -- 75 percent more than Canada or France -- yet rank near the bottom among industrial countries in indicators from life expectancy to infant mortality.

If you think our journalistic elites don't believe France is superior, raise your hand.

Well, you must all have broken arms -- be thankful they are being treated here in the America. Data from the OECD compiled by the Commonwealth Fund shows that on the measures that matter, the U.S. does much better than most other countries, including France. When deaths from a disease are compared to incidence, the U.S. has better survival rates for prostrate cancer, breast cancer, and AIDS. We also have more access to medical technology. We exceed all other countries in bypass surgery and are surpassed only by Japan in MRI machines (and are way ahead of France on both of those measures).

Krugman is able to claim France is superior to the U.S. by comparing life expectancy and infant mortality. But as John C. Goodman, Gerald L. Musgrave and Devon M. Herrick state in Lives at Risk, "Average life expectancy tells us almost nothing about the efficacy of health care systems because, throughout the developed world, there is very little correlation between health care spending and life expectancy." Rather, it has far more to do with genetic and social factors like lifestyle and education. Genetics also go a long way to explaining differences in infant mortality. A factor that is highly significant in infant mortality is low birth weight. For reasons not yet fully understood, African-American women deliver lower-weight babies at twice the rate of whites, driving up the U.S. rate of infant mortality relative to other developed countries. Life expectancy and infant mortality are comparisons commonly used by advocates of socialized medicine. However, as criticisms of a health-care system they are meaningless.

Next, Krugman claims that government health care is more efficient than the private sector:

The fact is that in health care, the private sector is often bloated and bureaucratic, while some government agencies -- notably the Veterans Administration system -- are lean and efficient.

Krugman should speak with some doctors who have to wade through the thicket of Medicare and Medicaid regulations. They might inform him that the efficiency of government-run health care is illusory. The reason is that the private sector bears the bulk of the cost of complying with government health care regulations and mandates. This is what enables the political left to claim government health care bureaucracies have low administrative costs. But it is misleading. As Sally Pipes of the free-market Pacific Research Institute puts it, "It's as if the IRS claimed the costs of our complicated tax code were limited to the agency's processing costs, neglecting the hours that individuals and companies must spend complying with the law."

As for the Veterans Administration, a little web searching reveals it is a mess. A 1993 GAO report found that waiting time to see a specialist at a VA hospital averaged 62 days, and 13% of patients in urgent need waited an hour or more at an emergency room (indeed, 2% waited three or more hours!). More recently, the VA Inspector General testified before Congress that the VA could institute reforms that would save "approximately $7 billion by preventing waste, fraud, and abuse." That included over $209 million that went to veterans who were fugitives from the law. Hardly the textbook definition of "lean and efficient."

Finally, Krugman gives us this canard:

Over the next few weeks I'll back up these assertions, and talk about what a workable health care reform might look like, if we can get ideology out of the way.

I'll believe it when I see it. Back in January Krugman said he would "suggest steps to strengthen" Social Security in the next few weeks. As Matthew Hoy points out, we're still waiting.

If we want to deal with the rising cost of health care, we need to make health care more consumer-driven. That means giving tax credits directly to individuals, repealing burdensome government regulations, and introducing Health Savings Accounts to programs like Medicare and Medicaid. Krugman has it exactly wrong. The problem with health care in this country is that it still relies on the ideologically driven belief that government can provide it better than the free market.

topics:
Taxes, Education, Health Care, Social Security, Medicaid, Law, Africa, Medicare