Paul Krugman: Why markets can’t cure healthcare

The problem with health care is no amount of money will ever be enough.<p>It's one of those areas where you can spend and spend and spend and you will still be far away from satisfying the needs we have.<p>The Danish model that I grew up with is ok, but don't expect treatment that are even half that of a good American hospital.<p>Put on top of that the fact that we are "discovering" (or inventing) more and more sickness that we can then threat which people expect the hospital to take care of.<p>Perhaps the real trick is to tax those treatments that are extremely both important and expensive and let the insurance companies take care of the milder forms of sickness. That way if technology makes what used to be expensive treatments easy and cheap they can be pushed into the private market.<p>Don't know, it's a tough nut to crack.

"There are, however, no examples of successful health care based on the principles of the free market, for one simple reason: in health care, the free market just doesn’t work. And people who say that the market is the answer are flying in the face of both theory and overwhelming evidence."<p>I'm quite curious where it has even been attempted (I'm assuming that Krugman is aware that it's difficult to prove a negative). There are submarkets where markets are being tried - prescription eye glasses for instance.<p>There are all types of insurance that cover complicated risks as well - this doesn't mean they are uninsurable (excess of loss coverage on any variety of things). But I think Krugman's biggest failings is in making a convincing argument that all healthcare is necessarily expensive. Back to the prescription eyeglass example - where the competition between opticians, optometrists and ophthalmologists have made costs rise considerably less than healthcare costs as a whole. Further, if you look at the innovations in ambulatory care centers, there have been dramatic reductions in costs.<p>Finally, let's also be reasonable about government run healthcare that has its own set of issues with spiraling costs and often lower standards of care. As a Canadian, you often see the effects of rationing - ie people wait. People die in the waiting line. The system is still quite expensive and is set to become even more so given demographics. It is however an interesting debate - where I worry though is given the US is the dominant innovator in healthcare, will the tinkerings to how and what incentives are offered dramatically reduce innovation? Despite being an obviously imperfect system (which one is perfect for that matter?), most Americans at least say they are satisfied with their own healthcare insurance. Are these really then acceptable tradeoffs to move to a largely government run system - especially given the level of competence we have seen them run the recent stimulus packages?

<i>How to Cure Health Care</i> by Milton Friedman: <a href="http://www.hoover.org/publications/digest/3459466.html" rel="nofollow">http://www.hoover.org/publications/digest/3459466.html</a>

One can agree with (almost) every specific point Krugman makes, and yet disagree with his conclusion.<p>I don't think many economists would claim that free markets offer a perfect solution regarding health care. Rather, they would argue that the alternatives (for example, a government run system) are worse.

A rejoinder/rebuttal by another prominent economist - <a href="http://gregmankiw.blogspot.com/2009/07/trust.html" rel="nofollow">http://gregmankiw.blogspot.com/2009/07/trust.html</a>

<a href="http://en.wikipedia.org/wiki/Flexicurity" rel="nofollow">http://en.wikipedia.org/wiki/Flexicurity</a> FTW.

<i>There are, however, no examples of successful health care based on the principles of the free market</i><p>This is easy to refute.<p>Flash back 100 years. People had healthcare they received from a family doctor. Insurance was non-existent, and the free market reigned.<p>In fact, it was the <i>success</i> of the free market in healthcare that led -- and continues to lead -- for more and more complicated, expensive treatments that save more and more lives.<p>I see three problems with markets and healthcare:<p>1) Insurance policies are so obfuscated that nobody understands what they are buying. Government needs to step in here and create standard insurance policy baselines. This will allow me to make an informed decision.<p>2) The people receiving healthcare have little or no input into cost control -- the people controlling costs have no "skin in the game" when it comes to value and quality of care. This decoupling needs to be fixed to encourage individuals to monitor and control their own costs.<p>3) If society has a greater interest in making sure there is a basic level of healthcare for all, as it does with say automotive insurance, then it should be a law for all people to have personal health insurance that covers these catastrophic scenarios. This would also mean allowing all insurance to be tax deductable and decoupling insurance completely from employers. It should be completely portable and associated just with the person.<p>Compared to some of the huge plans I've seen, these are really easy to describe. A bill could be just a couple of pages, and most Americans could understand exactly what is being passed. Instead of trying to have one huge law "fix" the problem, it simply provides some definitions and takes one huge problem and breaks it up into hundreds of millions of little problems that can be solved various ways.<p>Why we continue to think that some legislative body can create gargantuan one-size-fits-all solutions is beyond me. Evolution, machine learning, market theory, chaos -- lots of real, hard science says that solutions are iterative, incremental, and adaptive. Not complex and static.