Sunday, July 26, 2009

Paul Krugman explains why the free market model fails Health Care

The following is from Paul Krugman's blog "The Conscience of a liberal."
For a fuller account of the economics of health care see Krugman's Heath Economics 101
There are two strongly distinctive aspects of health care. One is that you don’t know when or whether you’ll need care — but if you do, the care can be extremely expensive. The big bucks are in triple coronary bypass surgery, not routine visits to the doctor’s office; and very, very few people can afford to pay major medical costs out of pocket.

This tells you right away that health care can’t be sold like bread. It must be largely paid for by some kind of insurance. And this in turn means that someone other than the patient ends up making decisions about what to buy. Consumer choice is nonsense when it comes to health care. And you can’t just trust insurance companies either — they’re not in business for their health, or yours.

This problem is made worse by the fact that actually paying for your health care is a loss from an insurers’ point of view — they actually refer to it as “medical costs.” This means both that insurers try to deny as many claims as possible, and that they try to avoid covering people who are actually likely to need care. Both of these strategies use a lot of resources, which is why private insurance has much higher administrative costs than single-payer systems. And since there’s a widespread sense that our fellow citizens should get the care we need — not everyone agrees, but most do — this means that private insurance basically spends a lot of money on socially destructive activities.

The second thing about health care is that it’s complicated, and you can’t rely on experience or comparison shopping. (”I hear they’ve got a real deal on stents over at St. Mary’s!”) That’s why doctors are supposed to follow an ethical code, why we expect more from them than from bakers or grocery store owners.

You could rely on a health maintenance organization to make the hard choices and do the cost management, and to some extent we do. But HMOs have been highly limited in their ability to achieve cost-effectiveness because people don’t trust them — they’re profit-making institutions, and your treatment is their cost.

Between those two factors, health care just doesn’t work as a standard market story.

After reading this it is a very good idea to get acquainted with the data collected (from numerous expert studies and sources) by the bi-partisan National Coalition on Health Care which recommends a public plan as part of reform and details the fact that our system not only broken but shredded to bits. Equally, the data provided by The World Health Organization is an eye opener about how badly our system is working - or better, not working.

Once Krugman's arguments are understood and the data (which I have linked too) fully known we must all come to have the courage to understand that our private health care system has failed us - it's time for a publicly funded insurance plan.


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