Paul Krugman has a post criticizing some rather silly and superficial comments about healthcare made by Steve Levitt. In a discussion with David Cameron, Levitt compared free healthcare to a market where cars were free. Of course the healthcare market differs from the car market in some very important ways not captured by that analogy. It’s not that the analogy is useless (it does help to explain why America spends so much on healthcare), rather the problem is that it is just the starting point of a discussion, not a useful way of summing up the problem.
So Krugman’s right about that, but this comment made me want to scream at the computer:
That’s us in the upper right-hand corner: our uniquely privatized system is uniquely expensive, while overall indicators of the quality of care don’t point to any US superiority. So on the face of it, the evidence strongly suggests that the proposition that health is an area where private markets work badly is borne out by experience.
Our “uniquely privatized system?” A system where nearly half of healthcare expenditures are made by the government? And much of the other half is made by insurance companies that are private in name only? Recall that nearly 40% of the cost of “private” health insurance is covered by government subsidies. And that government regulators determine what procedures must be covered. And the government controls entry into the healthcare industry. This is called a “uniquely private system”? Both America and Europe have socialized medicine, the Europeans are just better than us at avoiding massive waste in the system. Both our so-called “private” insurance and our so-called “public” insurance systems are far more expensive than in Europe.
Krugman doesn’t mention that Levitt also opposes the US healthcare system (a pretty important oversight), as does any sensible person. It’s a disaster. The car analogy is useful in one respect. If you make something “free” for the consumer, and don’t regulate spending effectively, you have huge excess spending. So how come the European systems have “free” healthcare as well, without as much overspending? It’s simple; they ration care. We are going to have to do the same.
The real choice is not between the US system and the European systems, but between systems where people pay out of pocket (like Singapore) and systems where they don’t (the US and Europe.) Of course Krugman won’t show you that sort of graph, as it would demonstrate exactly the opposite of what he claims. Singapore spends much less on healthcare. Indeed he didn’t even include Singapore in his graph—I wonder why? (Yes, Singapore regulates health care costs, as do all countries. But that’s not what Krugman’s chart was addressing.)
Krugman is pretty unreliable when talking about free market reforms. Recall that (in 2007) he claimed that Argentina and Mexico had adopted Chile’s neoliberal reforms, without the good results. I suspect he gets his information from reading Naomi Klein.
This also caught my attention:
There’s also the resurgence of faith-based free-market fundamentalism. I’ll write more on this soon, but I’m seeing on multiple fronts signs of an attempt to wave away everything that happened to the world these past seven years and go back to the notion that the market always knows best.
Attempts to wave away everything that has happened over the past seven years? What does that remind me of? Maybe this:
Here we go again. I laughed, I cried and I felt like it was 2006 all over again while reading the financial press this week cheerlead administration steps designed to “ease mortgage credit.” What’s really happening is, in an incredible gift to banks and investors, Fannie Mae and Freddie Mac have now officially completed their horror-movie-like rise from the dead. Expect to see Housing Bubble 2 in neighborhood theaters near you very soon, with investors laughing all the way to the bank.
Mel Watt, the new director of the Federal Housing Finance Agency, gave his first public speech on Monday, and made clear that the notion of winding down Freddie and Fannie was dead. In fact, he called for increasing their role in greasing housing sales. Headline after headline expressed relief that it’ll be easier to get mortgages, and what a great thing that is for the economy. The same lack of curiosity by financial journalists that helped create the housing mess — if banking regulators say it, it must be true! — has reared its ugly head again.
. . .
Lowered lending standards. Abandoning down payment requirements. Forgiveness for banks that originate underperforming loans. And most of all, pressure to prime a sluggish market and a sluggish economy using any means possible — and a green light from Washington, D.C. – these are all the elements that were place back in 2001 that led to the housing bubble.
Oddly I’m not seeing much outrage in the liberal blogosphere. Perhaps because it’s the Democrats in Congress and the White House that are leading the charge for bringing back the “deregulated” housing regime that (in 2008) progressives assured us caused the financial crisis.