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Market fundamentalism

September 3rd, 2009 · No Comments

We’ve argued many times on these pages it was the biggest root cause of the financial crisis, the belief that the market is always right, government always the problem, never the solution. It is based on a very simple understanding of markets that have little to do with how real-world markets function. Now that same simple philosophy is threatening healthcare reform…

Paul Krugman noted earlier that in one of these town-hall meetings where congressmen explain the healthcare reform proposals. The gathered crowd was outraged by the prospect of public provision of healthcare (“socialized” healthcare), yet when asked how many of them were on Medicare, and whether they were satisfied by it, more than half raised their hands. They weren’t even aware of the fact that Medicare is a government program, and not a bad one either, as survey after survey shows.

The fact is, the US largely private healthcare spends almost twice as much as most other developed nations with largely public healthcare (relative to GDP), and the outcomes are worse by almost any metric.

Health Care That Works

Nicholas D. Kristof, New York Times

Health care reform may be defeated this year in part because so many Americans believe the government can’t do anything right and fear that a doctor will come to resemble an I.R.S. agent with a scalpel. Yet the part of America’s health care system that consumers like best is the government-run part.

Fifty-six to 60 percent of people in government-run Medicare rate it a 9 or 10 on a 10-point scale. In contrast, only 40 percent of those enrolled in private insurance rank their plans that high.

Multiple surveys back that up. For example, 68 percent of those in Medicare feel that their own interests are the priority, compared with only 48 percent of those enrolled in private insurance.

In truth, despite the deeply ingrained American conviction that government is bumbling when it is not evil, government intervention has been a step up in some areas from the private sector.

Until the mid-19th century, firefighting was left mostly to a mishmash of volunteer crews and private fire insurance companies. In New York City, according to accounts in The New York Times in the 1850s and 1860s, firefighting often descended into chaos, with drunkenness and looting.

So almost every country moved to what today’s health insurance lobbyists might label “socialized firefighting.” In effect, we have a single-payer system of public fire departments.

We have the same for policing. If the security guard business were as powerful as the health insurance industry, then it would be denouncing “government takeovers” and “socialized police work.”

Throughout the industrialized world, there are a handful of these areas where governments fill needs better than free markets: fire protection, police work, education, postal service, libraries, health care. The United States goes along with this international trend in every area but one: health care.

The truth is that government, for all its flaws, manages to do some things right, so that today few people doubt the wisdom of public police or firefighters. And the government has a particularly good record in medical care.

Take the hospital system run by the Department of Veterans Affairs, the largest integrated health system in the United States. It is fully government run, much more “socialized medicine” than is Canadian health care with its private doctors and hospitals. And the system for veterans is by all accounts one of the best-performing and most cost-effective elements in the American medical establishment.

A study by the Rand Corporation concluded that compared with a national sample, Americans treated in veterans hospitals “received consistently better care across the board, including screening, diagnosis, treatment and follow-up.” The difference was particularly large in preventive medicine: veterans were nearly 50 percent more likely to receive recommended care than Americans as a whole.

“If other health care providers followed the V.A.’s lead, it would be a major step toward improving the quality of care across the U.S. health care system,” Rand reported.

As for the other big government-run health care system in the United States, Medicare spends perhaps one-sixth as much on administration as private health insurers, although the comparison is imperfect and controversial.

But the biggest weakness of private industry is not inefficiency but unfairness. The business model of private insurance has become, in part, to collect premiums from healthy people and reject those likely to get sick — or, if they start out healthy and then get sick, to find a way to cancel their coverage.

A reader wrote in this week to tell me about a colleague of hers who had health insurance through her company. The woman received a cancer diagnosis a few weeks ago, and she now faces chemotherapy co-payments that she cannot afford. Worse, because she is now unable to work and has to focus on treatment, she has been shifted to short-term disability for 90 days — and after that, she will lose her employer health insurance.

She can keep her insurance if she makes Cobra payments on her own, but she can’t afford this. In her case, her company will voluntarily help her — but I just don’t understand why we may be about to reject health reform and stick with a dysfunctional system that takes away the health coverage of hard-working Americans when they become too sick with cancer to work.

On my blog, foreigners regularly express bewilderment that America may reject reform and stick with a system that drives families into bankruptcy when they get sick. That’s what they expect from the Central African Republic, not the United States.

Let’s hope we won’t miss this chance. A public role in health care shouldn’t be any scarier or more repugnant than a public fire department.

Tags: Opinion