Krugman: Government does health insurance better

Where Government Excels

By Paul Krugman
The New York Times, April 10, 2015

Like all advanced nations, America mainly relies on private markets and private initiatives to provide its citizens with the things they want and need, and hardly anyone in our political discourse would propose changing that. The days when it sounded like a good idea to have the government directly run large parts of the economy are long past.

Yet we also know that some things more or less must be done by government. Every economics textbooks talks about “public goods” like national defense and air traffic control that can’t be made available to anyone without being made available to everyone, and which profit-seeking firms, therefore, have no incentive to provide. But are public goods the only area where the government outperforms the private sector? By no means.

One classic example of government doing it better is health insurance. Yes, conservatives constantly agitate for more privatization — in particular, they want to convert Medicare into nothing more than vouchers for the purchase of private insurance — but all the evidence says this would move us in precisely the wrong direction. Medicare and Medicaid are substantially cheaper and more efficient than private insurance; they even involve less bureaucracy. Internationally, the American health system is unique in the extent to which it relies on the private sector, and it’s also unique in its incredible inefficiency and high costs.



By Don McCanne, MD

Next week, when the Senate returns from its break, they will likely approve House-passed H.R.2 - the “SGR fix” - a bill that is being used as a vehicle to move Medicare closer to privatization by taking small incremental steps in increasing Medicare premiums and deductibles - features that are more characteristic of private individual plans than public social insurance programs.

Paul Krugman reminds us that governments are better at providing health insurance. So we should reject the current bipartisan efforts that are moving us further in the direction of converting Medicare from a public insurance program into a premium support model (defined contribution vouchers) of a market of private health plans.

This week’s taxpayer boost given by the Obama administration to the private Medicare Advantage plans - the fourth such devious boost in the past four years - enhances the private plans to set them up as a model for privatized Medicare. Is there no stopping this?