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Paul Krugman doesn't have private health insurance

John Goodman's picture
By John Goodman

As long as Paul Krugman continues to write about health care -- a subject about which he is woefully ignorant -- we will never run out of fodder for posts at John Goodman's Health Policy Blog. Just fact checking Krugman's errors and omissions is almost a full-time job.

In his latest assault on reason and sensibility, he has this to say:

As it happens, I've recently had fairly extensive dealings with both our health care system and with the New Jersey DMV. In one case, I encountered vast amounts of paperwork, mind-numbing bureaucracy, and extremely frustrating delays. In the other, my needs were met quickly and politely.

So far, then, it's DMV 1, private health system (and I have very good insurance) 0.

I am willing to concede that Krugman's report of his own experience is probably accurate. But if we let the DMV manage the health care system would we get more efficient health care? Of course not.

Krugman makes two assertions over and over again in his columns: (1) that government health care is more efficient than private health care and (2) that the health care systems of other countries are more efficient than our own (presumably because other countries have more government involvement). In both cases, the underlying premise is that there is some fundamental difference between public and private health insurance. This is a belief widely held both on the left and the right of the political spectrum. It is a belief that is wrong.

One source of the error is the mistaken idea that Medicare and Medicaid are actually run by the government. They aren't. Medicare in the United States is managed almost everywhere by BlueCross, Humana, WellPoint and other private contractors. These, of course, are the same entities that manage private health insurance. Much of Medicaid is privately managed as well. Furthermore, one out of every four Medicare enrollees and two of every three Medicaid enrollees are enrolled in private health plans, even though government is paying the bill. Moreover, in the rest of the health care system, private insurers pay providers the same way that the government pays. They use the same billing codes and pay for the same services the same way.

In general, private insurance in the United States is so heavily regulated that it bears no relationship to what we would find in a free marketplace. Indeed, what we call private insurance in this country is little more than private-sector socialism.

That leads us to the other mistake that is made at both ends of the political spectrum: the belief that other health care systems are radically different from our own. They aren't.

Take the United States and Canada. I would say that the health care systems of these two countries are 80 percent the same. In both countries, third-party payers pay the vast majority of medical expenses. In both countries, the third parties pay by task. In Canada, when patients see a physician, it's free. In the United States, it's almost free. In both countries, normal market forces have been completely suppressed. Health care in both places, therefore, is bureaucratic, cumbersome, wasteful, inefficient, and unresponsive to consumer needs.

One reason so many people get misled is that in Canada, government is the third-party payer, whereas in the United States, about half of all spending is private. True enough, our public insurance looks just like the socialized insurance we find in Canada. But so does our private insurance.

People on the left and right who are prone to stress the differences between U.S. health care and the health care of other countries invariably ignore the 80 percent commonality and focus on the remaining 20 percent. On the left, the focus is usually on the ways we appear to be worse; on the right, the focus is usually on the ways we appear to be better. But even here the differences are narrowing, and I expect that trend will continue.

Doctors who object to managed-care interference with the practice of medicine in this country will not be pleased to learn that everything that is happening here is finding its way to other countries as well. Indeed, U.S. insurance companies are contracting with governments in other countries to export what they do here to other places. People who are concerned about rationing by waiting in other countries had better brace themselves. Waiting times are growing in the United States as well.

As for global budgets, a lot of state Medicaid programs already have them. They are about to go system wide in Massachusetts in the near future.

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