Economic Report of the President
and
The Annual Report of the Council of Economic Advisors
February 2004
Chapter 10
Health Care and Insurance
This chapter discusses the roles of innovation, insurance, and reform in the health care market. The key points in this chapter are: U.S. markets provide incentives to develop innovative health care products and services that benefit both Americans and the global community.
. Over reliance on health insurance as a payment mechanism leads to an inefficient use of resources in providing and utilizing health care.
. Reforms should provide consumers and health care providers with more flexibility and information.
http://www.gpoaccess.gov/eop/index.html
And…
The New York Times
February 17, 2004
The Health of Nations
By Paul Krugman
The Economic Report of the President, released last week, has drawn criticism on several fronts. Let me open a new one: the report’s discussion of health care, which shows a remarkable indifference to the concerns of ordinary Americans…
When I saw that the president’s economic report devoted a whole chapter to
health care, I assumed that it would make some attempt to address these public concerns.
Instead, the report pooh-poohs the problem. Although more than 40 million
people lack health insurance, this doesn’t matter too much because “the uninsured are a diverse and perpetually changing group.” This is good news? At any given time about one in seven Americans is uninsured, which is bad enough. Because the uninsured are a “perpetually changing group,” however, a much larger fraction of the population suffers periodic, terrifying spells of being uninsured, and an even larger fraction lives with the fear of losing insurance if anything goes wrong at work or at home.
The report also seems to have missed the point of health insurance. It argues that it would be a good thing if insurance companies had more information about the health prospects of clients so “policies could be tailored to different types and priced accordingly.”
Having brushed off the plight of those who, for economic or health reasons, cannot get insurance, the report turns to a criticism of health insurance in general, which it blames for excessive health care spending.
Is this really the crucial issue? It’s true that the U.S. spends far more on health care than any other country, but this wouldn’t be a bad thing if the spending got results. The real question is why, despite all that spending, many Americans aren’t assured of the health care they need, and American life expectancy is near the bottom for advanced countries.
Where is the money going? A lot of it goes to overhead. The result is that American health care, which at its best is the best in the world, offers much of the population a worst-of-all-worlds combination of insecurity and high costs. And that combination is getting worse:insurance premiums are rising, and companies are becoming increasingly unwilling to offer insurance to their employees.
What would an answer to the growing health care crisis look like? It would surely involve extending coverage to those now uninsured. To keep costs down, it would crack down both on drug prices and on administrative costs. And it might well cut private insurance companies out of the loop for some, if not all, coverage.
But the administration can’t offer such an answer, both because of its ideological blinders and because of its special interest ties. The Economic Report of the President has only negative things to say about efforts to hold down drug prices. It talks at length about insurance reform, but it mainly complains that we rely too much on insurance; it says nothing about either expanding coverage or reducing insurance-company overhead. Its main concrete policy suggestion is a plan for tax-deductible health savings accounts, which would be worth little or nothing to a vast majority of the uninsured.
Comment: Perhaps the easiest way to attack the dual problem of high health care costs with a grossly inadequate system of insurance is to condemn our over reliance on insurance. That takes care of the healthy and wealthy. But what do we do about those with health care needs?
Perhaps the easiest solution is really in the opposite direction – provide comprehensive coverage for everyone.