Social Security & Medicare Notes: Krugman on healthcare

Saturday, March 18, 2006

Krugman on healthcare

Paul Krugman writes in the March 23, 2006 New York Review of Books [and, for some odd reason, suggests three books on how we need to structure American healthcare.]

There's now a large body of evidence on what works and what doesn't work in health care, and it's not hard to see how to make dramatic improvements in US practice. As we'll see, the evidence clearly shows that the key problem with the US health care system is its fragmentation. A history of failed attempts to introduce universal health insurance has left us with a system in which the government pays directly or indirectly for more than half of the nation's health care, but the actual delivery both of insurance and of care is undertaken by a crazy quilt of private insurers, for-profit hospitals, and other players who add cost without adding value. A Canadian-style single-payer system, in which the government directly provides insurance, would almost surely be both cheaper and more effective than what we now have. And we could do even better if we learned from "integrated" systems, like the Veterans Administration, that directly provide some health care as well as medical insurance.

Krugman presents three facts to consider.

First, health care spending is rising rapidly "regardless of the source of its funding." Typically, Medicare increases have been lower than those of private health insurance.

Second, "new medical technology" is the major factor in rising spending: we spend more on medicine because there's more that medicine can do.
Third, in medical care, "technological advances have generally raised costs rather than lowered them": although new technology surely produces cost savings in medicine, as elsewhere, the additional spending that takes place as a result of the expansion of medical possibilities outweighs those savings.

So the fact that healthcare expenses are going up means that there is more that the healthcare system can do for our health, not that it is getting more inefficient. The problem is the crazy-quilt of fragmented systems we have created to deliver the medical care. Medicare provides the same excellent care at lower cost than private insurers do, and the Veteran's Administration has clearly demonstrated that a better organized system can provide both better care and do it at lower cost.

Krugman has a lot more to say. Go read it. [Be sure after the first couple of paragraphs to scroll down past the large blank space that apparently should have an advertisment in it.]

Krugman also recommends three books on the subject.

Can We Say No? The Challenge of Rationing Health Care

by Henry J. Aaron and William B. Schwartz, with Melissa Cox
Brookings Institution, 199 pp., $44.95; $18.95 (paper)

The Health Care Mess: How We Got into It and What It Will Take to Get Out

by Julius Richmond and Rashi Fein
Harvard University Press, 320 pp., $26.95

Healthy, Wealthy, and Wise: Five Steps to a Better Health Care System

by John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler
American Enterprise Institute/Hoover Institution, 130 pp., $18.00

I have not yet read any of them yet, but if Krugman recommends them they probably have a lot to say. Click on the icons on the right side of this blog to order them from Barnes & Noble.