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The New York Times
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         August 27, 2004

*OP-ED COLUMNIST*


   America's Failing Health

*By PAUL KRUGMAN*

Working Americans have two great concerns: the growing difficulty of 
getting health insurance, and the continuing difficulty they have in 
finding jobs. These concerns may have a common cause: soaring insurance 
premiums.

In most advanced countries, the government provides everyone with health 
insurance. In America, however, the government offers insurance only if 
you're elderly (Medicare) or poor (Medicaid). Otherwise, you're expected 
to get private health insurance, usually through your job. But insurance 
premiums are exploding, and the system of employment-linked insurance is 
falling apart.

Some employers have dropped their health plans. Others have maintained 
benefits for current workers, but are finding ways to avoid paying 
benefits to new hires - for example, by using temporary workers. And 
some businesses, while continuing to provide health benefits, are 
refusing to hire more workers.

In other words, rising health care costs aren't just causing a rapid 
rise in the ranks of the uninsured (confirmed by yesterday's Census 
Bureau report); they're also, because of their link to employment, a 
major reason why this economic recovery has generated fewer jobs than 
any previous economic expansion.

Clearly, health care reform is an urgent social and economic issue. But 
who has the right answer?

The 2004 Economic Report of the President told us what George Bush's 
economists think, though we're unlikely to hear anything as blunt at 
next week's convention. According to the report, health costs are too 
high because people have too much insurance and purchase too much 
medical care. What we need, then, are policies, like tax-advantaged 
health savings accounts tied to plans with high deductibles, that induce 
people to pay more of their medical expenses out of pocket. (Cynics 
would say that this is just a rationale for yet another tax shelter for 
the wealthy, but the economists who wrote the report are probably sincere.)

John Kerry's economic advisers have a very different analysis: they 
believe that health costs are too high because private insurance 
companies have excessive overhead, mainly because they are trying to 
avoid covering high-risk patients. What we need, according to this view, 
is for the government to assume more of the risk, for example by picking 
up catastrophic health costs, thereby reducing the incentive for 
socially wasteful spending, and making employment-based insurance easier 
to get.

A smart economist can come up with theoretical justifications for either 
argument. The evidence suggests, however, that the Kerry position is 
much closer to the truth.

The fact is that the mainly private U.S. health care system spends far 
more than the mainly public health care systems of other advanced 
countries, but gets worse results. In 2001, we spent $4,887 on health 
care per capita, compared with $2,792 in Canada and $2,561 in France. 
Yet the U.S. does worse than either country by any measure of health 
care success you care to name - life expectancy, infant mortality, 
whatever. (At its best, U.S. health care is the best in the world. But 
the ranks of Americans who can't afford the best, and may have no 
insurance at all, are large and growing.)

And the U.S. system does have very high overhead: private insurers and 
H.M.O.'s spend much more on administrative expenses, as opposed to 
actual medical treatment, than public agencies at home or abroad.

Does this mean that the American way is wrong, and that we should switch 
to a Canadian-style single-payer system? Well, yes. Put it this way: in 
Canada, respectable business executives are ardent defenders of 
"socialized medicine." Two years ago the Conference Board of Canada - a 
who's who of the nation's corporate elite - issued a report urging 
fellow Canadians to bear in mind not just the "symbolic value" of 
universal health care, but its "economic contribution to the 
competitiveness of Canadian businesses."

My health-economist friends say that it's unrealistic to call for a 
single-payer system here: the interest groups are too powerful, and the 
antigovernment propaganda of the right has become too well established 
in public opinion. All that we can hope for right now is a modest step 
in the right direction, like the one Mr. Kerry is proposing. I bow to 
their political wisdom. But let's not ignore the growing evidence that 
our dysfunctional medical system is bad not just for our health, but for 
our economy.


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