Healthcare Economics

HEALTHCARE ECONOMICS…..Via libertarian economist Tyler Cowen, libertarian economist Arnold Kling takes a whack at liberal economist Paul Krugman and his support for universal healthcare:

There is no actual evidence that the elderly [under Medicare] receive better care, or more cost-effective care, or more egalitarian care than people under 65. Krugman thinks that health care policy is a morality play, in which those who favor national health insurance wear white hats, and that their opponents are “special interests.” That is not a viewpoint for which economic analysis is necessary or sufficient.

I agree with Kling’s last sentence. I doubt that a universal healthcare system in the United States would either reduce overall healthcare costs or increase efficiency more than modestly. It might, since our current system is a wildly fragmented kluge, but my guess is that the United States spends a lot on healthcare primarily because we’re a rich country that chooses to spend a lot of money on healthcare.

In that narrow sense, then, Kling is right that this is not an argument based on economic analysis. However, there are many non-economic benefits to universal healthcare:

  • It’s, um, universal. Everyone is covered, not just the lucky duckies with good jobs (or spouses with good jobs).

  • It levels the playing field for corporations. Corporations that offer decent healthcare to their employees are currently at a disadvantage compared to both domestic competitors who don’t cover their workers as well as to overseas competitors whose workers rely on national healthcare systems.

  • Universal healthcare allows you to choose a doctor and stay with her. You aren’t forced to switch doctors whenever you get a new job or your company’s HR department decides to change health plans. As Phil Longman points out, guaranteed long-term relationships can have a significant impact on long-term health outcomes.

  • It covers people who are high-risk or who have pre-existing conditions. Employer health plans often don’t for certain periods of time.

  • It provides continuing healthcare coverage for workers who temporarily lose their jobs.

  • If the experience of European systems is any guide, both overall health outcomes and satisfaction with health coverage is considerably higher under universal systems than under the U.S. system. Despite spending far less per person than in the U.S., quality of care is high and, contrary to Heritage Foundation legend, waiting times in the well-run systems are generally short.

  • In the U.S., Medicare recipients are far more satisfied with their health coverage than those with normal employer-based health plans. Stunningly, even the poor, who largely rely on Medicaid and emergency rooms, are more satisfied than those with employer plans.

I think it’s a mistake to try to analyze healthcare primarily in theoretical economic terms. After all, we have loads of empirical data at our disposal: the rest of the developed world has relied on national healthcare systems of one kind or another for decades and there’s little evidence that this has either hurt or helped their overall economic performance compared to the U.S. There are lots of factors that affect the economies of individual countries, but the provision of healthcare doesn’t seem to be one of them and even Kling doesn’t suggest otherwise. Nor does he try to pretend that Medicare provides worse healthcare than employer-based plans.

Universal healthcare might or might not reduce healthcare costs, but even in the worst case it would be an economic wash compared to what we have now. However, when you add to that the enormous non-economic benefits that universal healthcare provides, the decision to adopt it should be a no brainer.

The reason we don’t is….powerfully entrenched special interests. So Krugman is right: it’s primarily a morality play. Choose your side wisely.