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Paul Krugman: Why markets can’t cure healthcare

16 points by mellis 17y ago

known 17y ago
http://en.wikipedia.org/wiki/Flexicurity http://en.wikipedia.org/wiki/Flexicurity FTW.
- laut 17y ago
  Private healthcare FTW. You have a better chance of surviving cancer in the US than in Denmark. http://mjperry.blogspot.com/2008/07/cancer-survival-rates.html http://mjperry.blogspot.com/2008/07/cancer-survival-rates.ht... US healthcare is not a pure market based system, though. The regulations make it very expensive. - an expat Dane
  - jstevens85 17y ago
    Private health care can coexist with a system of Universal Health Care Coverage. Yes, the Canadian system is almost entirely run by the government, but there is no reason that the US most copy the Canadian system. In Australia, 40% of hospital services are delivered by privately run hospitals.
  - greendestiny 17y ago
    Maybe. Kind of tricky to compare when you have different demographics in so many ways - different aged populations would be a huge factor. A lot of government healthcare at the top of that graph if you forget about focusing on Denmark.
ThomPete 17y ago
The problem with health care is no amount of money will ever be enough. It's one of those areas where you can spend and spend and spend and you will still be far away from satisfying the needs we have. The Danish model that I grew up with is ok, but don't expect treatment that are even half that of a good American hospital. Put on top of that the fact that we are "discovering" (or inventing) more and more sickness that we can then threat which people expect the hospital to take care of. Perhaps the real trick is to tax those treatments that are extremely both important and expensive and let the insurance companies take care of the milder forms of sickness. That way if technology makes what used to be expensive treatments easy and cheap they can be pushed into the private market. Don't know, it's a tough nut to crack.
- mellis 17y ago
  It may be that no amount of money will ever be enough, but that money can be spent well or it can be spent badly. Doctors can prescribe an unnecessary procedure because they're paid for it or because they fear malpractice claims. Or they can prescribe an expensive drug or surgery with a high chance of saving your life. In America, we don't do a very efficient job of spending our health care dollars. In Denmark (where I'm living now), you may or may not get treatment as good as in an American hospital (you should try some of the public ones before you judge). At least you get the treatment you need regardless of your ability to pay, and without bankrupting you in the process.
  - cwan 17y ago
    Given the amounts that are spent both by public and private actors, you should qualify your statement. Clearly, vast amounts are being inefficiently spent through Medicare. The question though is that if government isn't already good at spending the money through medicare, what makes anyone think that if you give them the whole system to run, it will be any better?
    - mellis 17y ago
      What makes you think insurance companies spend money efficiently? For one thing, they tend to have much higher administrative costs than publicly run health care programs. See, for example, Wikipedia's article on health care in the US: http://en.wikipedia.org/wiki/Health_care_in_the_United_States#Administrative_costs http://en.wikipedia.org/wiki/Health_care_in_the_United_State... or this blog post by Ezra Klein: http://voices.washingtonpost.com/ezra-klein/2009/07/administrative_costs_in_health.html http://voices.washingtonpost.com/ezra-klein/2009/07/administ... There are also all the reasons cited in Krugman's post. Then there's the fact that the U.S. spends about twice as much on health care as any other developed nation and gets results that aren't clearly better overall. Is it a coincidence that we have the largest component of private spending? If the insurance companies aren't already good at spending money on health care, what makes anyone think that if you give them the whole system to run, it will be any better?
cwan 17y ago
"There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence." I'm quite curious where it has even been attempted (I'm assuming that Krugman is aware that it's difficult to prove a negative). There are submarkets where markets are being tried - prescription eye glasses for instance. There are all types of insurance that cover complicated risks as well - this doesn't mean they are uninsurable (excess of loss coverage on any variety of things). But I think Krugman's biggest failings is in making a convincing argument that all healthcare is necessarily expensive. Back to the prescription eyeglass example - where the competition between opticians, optometrists and ophthalmologists have made costs rise considerably less than healthcare costs as a whole. Further, if you look at the innovations in ambulatory care centers, there have been dramatic reductions in costs. Finally, let's also be reasonable about government run healthcare that has its own set of issues with spiraling costs and often lower standards of care. As a Canadian, you often see the effects of rationing - ie people wait. People die in the waiting line. The system is still quite expensive and is set to become even more so given demographics. It is however an interesting debate - where I worry though is given the US is the dominant innovator in healthcare, will the tinkerings to how and what incentives are offered dramatically reduce innovation? Despite being an obviously imperfect system (which one is perfect for that matter?), most Americans at least say they are satisfied with their own healthcare insurance. Are these really then acceptable tradeoffs to move to a largely government run system - especially given the level of competence we have seen them run the recent stimulus packages?
- projectileboy 17y ago
  Most Americans are satisfied with their health care because most Americans have employer-provided insurance, and so are utterly ignorant of the costs involved. Unfortunately for these people, the skyrocketing costs will affect them, too, and soon - either through flattened or depressed wages, reduced or eliminated health coverage, or both. With insurance premiums rising 10 - 20% annually, it's only a matter of time.
  - 17y ago
cwan 17y ago
A rejoinder/rebuttal by another prominent economist - http://gregmankiw.blogspot.com/2009/07/trust.html http://gregmankiw.blogspot.com/2009/07/trust.html
mhb 17y ago
How to Cure Health Care by Milton Friedman: http://www.hoover.org/publications/digest/3459466.html http://www.hoover.org/publications/digest/3459466.html
unignorant 17y ago
One can agree with (almost) every specific point Krugman makes, and yet disagree with his conclusion. I don't think many economists would claim that free markets offer a perfect solution regarding health care. Rather, they would argue that the alternatives (for example, a government run system) are worse.
- ThomPete 17y ago
  Which to my mind seem misguided to. It's not about government vs. private market, but about whether a society is willing to pay in solidarity with their peers for the less often but expensive and perhaps complicated procedures trough taxation. Or whether they think that it is better to have a system where those who can afford get the best treatment and pay through their insurance. IMHO a modern society finds a balance between what to lift collectively and what to make a personal responsibility. Not because it is moral just, but because it is financially a more useful model as long as it is to expensive to run through the private system. But again, it's not black and white, there are many arguments for and against.
- tome 17y ago
  Well then they're wrong, because government run systems work better in Western Europe and Canada than the US private system.
  - DanielBMarkham 17y ago
    Define "work better" please
    - tome 17y ago
      I will when the OP defines "worse".
      - DanielBMarkham 17y ago
        Is it just me? Or did we all suddenly become 3-year-olds?
DanielBMarkham 17y ago
There are, however, no examples of successful health care based on the principles of the free market This is easy to refute. Flash back 100 years. People had healthcare they received from a family doctor. Insurance was non-existent, and the free market reigned. In fact, it was the success of the free market in healthcare that led -- and continues to lead -- for more and more complicated, expensive treatments that save more and more lives. I see three problems with markets and healthcare: 1) Insurance policies are so obfuscated that nobody understands what they are buying. Government needs to step in here and create standard insurance policy baselines. This will allow me to make an informed decision. 2) The people receiving healthcare have little or no input into cost control -- the people controlling costs have no "skin in the game" when it comes to value and quality of care. This decoupling needs to be fixed to encourage individuals to monitor and control their own costs. 3) If society has a greater interest in making sure there is a basic level of healthcare for all, as it does with say automotive insurance, then it should be a law for all people to have personal health insurance that covers these catastrophic scenarios. This would also mean allowing all insurance to be tax deductable and decoupling insurance completely from employers. It should be completely portable and associated just with the person. Compared to some of the huge plans I've seen, these are really easy to describe. A bill could be just a couple of pages, and most Americans could understand exactly what is being passed. Instead of trying to have one huge law "fix" the problem, it simply provides some definitions and takes one huge problem and breaks it up into hundreds of millions of little problems that can be solved various ways. Why we continue to think that some legislative body can create gargantuan one-size-fits-all solutions is beyond me. Evolution, machine learning, market theory, chaos -- lots of real, hard science says that solutions are iterative, incremental, and adaptive. Not complex and static.
- sokoloff 17y ago
  I have a hard time figuring out how an individual healthcare consumer would have any rational reason to "monitor and control their own costs"? If I'm sick, I want to be made better. If I have cancer, I want it cured, etc. There's no point at which the average person with a reasonable prognosis for even 1 more year of life says "gee, that sounds expensive, perhaps I should just die instead, so as to control my own cost to society [or my insurance company]."

16 points by mellis 17y ago

known 17y ago

http://en.wikipedia.org/wiki/Flexicurity http://en.wikipedia.org/wiki/Flexicurity FTW.

laut 17y ago
Private healthcare FTW. You have a better chance of surviving cancer in the US than in Denmark. http://mjperry.blogspot.com/2008/07/cancer-survival-rates.html http://mjperry.blogspot.com/2008/07/cancer-survival-rates.ht... US healthcare is not a pure market based system, though. The regulations make it very expensive. - an expat Dane
- jstevens85 17y ago
  Private health care can coexist with a system of Universal Health Care Coverage. Yes, the Canadian system is almost entirely run by the government, but there is no reason that the US most copy the Canadian system. In Australia, 40% of hospital services are delivered by privately run hospitals.
- greendestiny 17y ago
  Maybe. Kind of tricky to compare when you have different demographics in so many ways - different aged populations would be a huge factor. A lot of government healthcare at the top of that graph if you forget about focusing on Denmark.

ThomPete 17y ago

The problem with health care is no amount of money will ever be enough. It's one of those areas where you can spend and spend and spend and you will still be far away from satisfying the needs we have. The Danish model that I grew up with is ok, but don't expect treatment that are even half that of a good American hospital. Put on top of that the fact that we are "discovering" (or inventing) more and more sickness that we can then threat which people expect the hospital to take care of. Perhaps the real trick is to tax those treatments that are extremely both important and expensive and let the insurance companies take care of the milder forms of sickness. That way if technology makes what used to be expensive treatments easy and cheap they can be pushed into the private market. Don't know, it's a tough nut to crack.

mellis 17y ago
It may be that no amount of money will ever be enough, but that money can be spent well or it can be spent badly. Doctors can prescribe an unnecessary procedure because they're paid for it or because they fear malpractice claims. Or they can prescribe an expensive drug or surgery with a high chance of saving your life. In America, we don't do a very efficient job of spending our health care dollars. In Denmark (where I'm living now), you may or may not get treatment as good as in an American hospital (you should try some of the public ones before you judge). At least you get the treatment you need regardless of your ability to pay, and without bankrupting you in the process.
- cwan 17y ago
  Given the amounts that are spent both by public and private actors, you should qualify your statement. Clearly, vast amounts are being inefficiently spent through Medicare. The question though is that if government isn't already good at spending the money through medicare, what makes anyone think that if you give them the whole system to run, it will be any better?
  - mellis 17y ago
    What makes you think insurance companies spend money efficiently? For one thing, they tend to have much higher administrative costs than publicly run health care programs. See, for example, Wikipedia's article on health care in the US: http://en.wikipedia.org/wiki/Health_care_in_the_United_States#Administrative_costs http://en.wikipedia.org/wiki/Health_care_in_the_United_State... or this blog post by Ezra Klein: http://voices.washingtonpost.com/ezra-klein/2009/07/administrative_costs_in_health.html http://voices.washingtonpost.com/ezra-klein/2009/07/administ... There are also all the reasons cited in Krugman's post. Then there's the fact that the U.S. spends about twice as much on health care as any other developed nation and gets results that aren't clearly better overall. Is it a coincidence that we have the largest component of private spending? If the insurance companies aren't already good at spending money on health care, what makes anyone think that if you give them the whole system to run, it will be any better?

cwan 17y ago

"There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence." I'm quite curious where it has even been attempted (I'm assuming that Krugman is aware that it's difficult to prove a negative). There are submarkets where markets are being tried - prescription eye glasses for instance. There are all types of insurance that cover complicated risks as well - this doesn't mean they are uninsurable (excess of loss coverage on any variety of things). But I think Krugman's biggest failings is in making a convincing argument that all healthcare is necessarily expensive. Back to the prescription eyeglass example - where the competition between opticians, optometrists and ophthalmologists have made costs rise considerably less than healthcare costs as a whole. Further, if you look at the innovations in ambulatory care centers, there have been dramatic reductions in costs. Finally, let's also be reasonable about government run healthcare that has its own set of issues with spiraling costs and often lower standards of care. As a Canadian, you often see the effects of rationing - ie people wait. People die in the waiting line. The system is still quite expensive and is set to become even more so given demographics. It is however an interesting debate - where I worry though is given the US is the dominant innovator in healthcare, will the tinkerings to how and what incentives are offered dramatically reduce innovation? Despite being an obviously imperfect system (which one is perfect for that matter?), most Americans at least say they are satisfied with their own healthcare insurance. Are these really then acceptable tradeoffs to move to a largely government run system - especially given the level of competence we have seen them run the recent stimulus packages?

projectileboy 17y ago
Most Americans are satisfied with their health care because most Americans have employer-provided insurance, and so are utterly ignorant of the costs involved. Unfortunately for these people, the skyrocketing costs will affect them, too, and soon - either through flattened or depressed wages, reduced or eliminated health coverage, or both. With insurance premiums rising 10 - 20% annually, it's only a matter of time.
- 17y ago

cwan 17y ago

A rejoinder/rebuttal by another prominent economist - http://gregmankiw.blogspot.com/2009/07/trust.html http://gregmankiw.blogspot.com/2009/07/trust.html

mhb 17y ago

How to Cure Health Care by Milton Friedman: http://www.hoover.org/publications/digest/3459466.html http://www.hoover.org/publications/digest/3459466.html

unignorant 17y ago

One can agree with (almost) every specific point Krugman makes, and yet disagree with his conclusion. I don't think many economists would claim that free markets offer a perfect solution regarding health care. Rather, they would argue that the alternatives (for example, a government run system) are worse.

ThomPete 17y ago
Which to my mind seem misguided to. It's not about government vs. private market, but about whether a society is willing to pay in solidarity with their peers for the less often but expensive and perhaps complicated procedures trough taxation. Or whether they think that it is better to have a system where those who can afford get the best treatment and pay through their insurance. IMHO a modern society finds a balance between what to lift collectively and what to make a personal responsibility. Not because it is moral just, but because it is financially a more useful model as long as it is to expensive to run through the private system. But again, it's not black and white, there are many arguments for and against.
tome 17y ago
Well then they're wrong, because government run systems work better in Western Europe and Canada than the US private system.
- DanielBMarkham 17y ago
  Define "work better" please
  - tome 17y ago
    I will when the OP defines "worse".
    - DanielBMarkham 17y ago
      Is it just me? Or did we all suddenly become 3-year-olds?

DanielBMarkham 17y ago

There are, however, no examples of successful health care based on the principles of the free market This is easy to refute. Flash back 100 years. People had healthcare they received from a family doctor. Insurance was non-existent, and the free market reigned. In fact, it was the success of the free market in healthcare that led -- and continues to lead -- for more and more complicated, expensive treatments that save more and more lives. I see three problems with markets and healthcare: 1) Insurance policies are so obfuscated that nobody understands what they are buying. Government needs to step in here and create standard insurance policy baselines. This will allow me to make an informed decision. 2) The people receiving healthcare have little or no input into cost control -- the people controlling costs have no "skin in the game" when it comes to value and quality of care. This decoupling needs to be fixed to encourage individuals to monitor and control their own costs. 3) If society has a greater interest in making sure there is a basic level of healthcare for all, as it does with say automotive insurance, then it should be a law for all people to have personal health insurance that covers these catastrophic scenarios. This would also mean allowing all insurance to be tax deductable and decoupling insurance completely from employers. It should be completely portable and associated just with the person. Compared to some of the huge plans I've seen, these are really easy to describe. A bill could be just a couple of pages, and most Americans could understand exactly what is being passed. Instead of trying to have one huge law "fix" the problem, it simply provides some definitions and takes one huge problem and breaks it up into hundreds of millions of little problems that can be solved various ways. Why we continue to think that some legislative body can create gargantuan one-size-fits-all solutions is beyond me. Evolution, machine learning, market theory, chaos -- lots of real, hard science says that solutions are iterative, incremental, and adaptive. Not complex and static.

sokoloff 17y ago
I have a hard time figuring out how an individual healthcare consumer would have any rational reason to "monitor and control their own costs"? If I'm sick, I want to be made better. If I have cancer, I want it cured, etc. There's no point at which the average person with a reasonable prognosis for even 1 more year of life says "gee, that sounds expensive, perhaps I should just die instead, so as to control my own cost to society [or my insurance company]."