"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?
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.
And arguably the best way to control said costs is through introduction of competition and also giving people choice (with cost trade offs). Isn't the alternative government price controls? One of the arguments that Greg Mankiw makes is that at least with private institutions you have choice however limited, to move to another institution whereas this isn't the case with government.
I'm not sure that healthcare costs will necessarily increase over time - there are some pretty stunning developments in area of ambulatory care with dramatic savings for insurers (not to mention improvements in quality of care at the same time).
Spending on health care, which is a projected to be 17.6% of the U.S.
gross domestic product (GDP) in 2009, has consistently
grown faster than the economy overall since the 1960s.
In 1970, U.S. health care spending was about $75
billion, or $356 per resident, and accounted for
7.2% of GDP.
Health care spending has risen about 2.4
percentage points faster than GDP since 1970.
Please tell us the source of your touching faith that this rather well-established long-term trend -- one which has already bankrupted millions -- will spontaneously reverse itself.
I should add as well that just because we're spending more on healthcare doesn't mean that it's getting more expensive. We may just be consuming more and better care. Here's a case for that argument:
http://gregmankiw.blogspot.com/2009/07/keeping-animial-spiri...
Comments
"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?
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.
And arguably the best way to control said costs is through introduction of competition and also giving people choice (with cost trade offs). Isn't the alternative government price controls? One of the arguments that Greg Mankiw makes is that at least with private institutions you have choice however limited, to move to another institution whereas this isn't the case with government.
I'm not sure that healthcare costs will necessarily increase over time - there are some pretty stunning developments in area of ambulatory care with dramatic savings for insurers (not to mention improvements in quality of care at the same time).
I'm not sure that healthcare costs will necessarily increase over time
From the Centers for Medicare and Medicaid Services, via the Kaiser Family Foundation:
http://www.kff.org/insurance/upload/7692_02.pdf
Spending on health care, which is a projected to be 17.6% of the U.S. gross domestic product (GDP) in 2009, has consistently grown faster than the economy overall since the 1960s.
In 1970, U.S. health care spending was about $75 billion, or $356 per resident, and accounted for 7.2% of GDP.
Health care spending has risen about 2.4 percentage points faster than GDP since 1970.
Please tell us the source of your touching faith that this rather well-established long-term trend -- one which has already bankrupted millions -- will spontaneously reverse itself.
http://www.ifc.org/ifcext/che.nsf/AttachmentsByTitle/Hc09_Be...
I should add as well that just because we're spending more on healthcare doesn't mean that it's getting more expensive. We may just be consuming more and better care. Here's a case for that argument: http://gregmankiw.blogspot.com/2009/07/keeping-animial-spiri...