I am often opposed to orthodoxy … in specific investment markets and games, for example.
I fit in well in that mode, especially when it comes to public policy issues. For example, I am averse to health care.
Personal freedom? We are no more free to choose our own doctors with most private insurance plans than with a one-time payment system.
Inexplicable bureaucracy? The managers of the insurance companies are just as horrible as the government variety.
Expensive grants? If you get your insurance from your employer, you get a massive tax subsidy. Your insurance benefit is not taxable even though it is as much a part of your compensation as your paycheck.
But the big problem for me is this: the financial benefits of having affordable health care outweigh the costs.
This is my case … and I want to know if it convinces you.
How do we get here?
The United States does not have a “system” of health care.
Which we’ve evolved from a deal between the United Automobile Workers and Detroit automakers in the late 1940s. Workers would accept a lower wage if they had cheap health coverage on the company account.
But no one expected that deal to be permanent. They assumed that postwar American citizens, many of whom had just sacrificed to preserve their country’s freedoms, would eventually get government-sponsored health care to support the private system.
But that did not happen. Instead, the business-based insurance system expanded to cover all industries. Over time, government-sponsored programs like Medicare and Medicaid emerged to fill the gaps for the jobless: the unemployed (Medicaid) and the retired (Medicare).
So both the company and the government systems were entrenched by special interests.
For a variety of reasons – basically employers, employees, insurers, and the healthcare industry had no incentive to control costs and premiums – the system got to the point where the US has one of the worst. health outcomes of any developed country.
And the highest rate of bankruptcies due to medical bills.
In other words, our health care “system” is a hodgepodge of temporary arrangements and counterrequisites that became permanent because no one could agree on anything else.
It hurts our economy enormously.
The United States spends more of its gross domestic product (GDP) on health care than any other country: 16%. But other economic effects of our employer-based insurance system reduce our GDP below its potential. Let’s consider three.
- Job lock: Many people take and keep jobs because they get health coverage. They stay in those jobs longer than they would otherwise. That means overall labor mobility in the US economy is lower, undermining the efficiency of the labor market.
- Lower startup ratesThe United States has one of the lowest rates of new business formation in the developed world, and it is getting worse. That’s because starting a business here is riskier than in other countries … because until you make a good profit, you can’t afford health insurance. Young people in the prime of life do not start businesses for this reason, which undermines job creation.
- Delayed retirement and weak labor market: Older workers tend to stay in their jobs longer in the US to maintain access to company insurance. That means less room for younger workers, keeping them underemployed and hurting their long-term career prospects.
In addition to $ 4 trillion in direct costs annually, by some estimates, these dysfunctional aspects of our health care system cost the US economy 3-5% of GDP. every year.
Could you afford a private highway?
So is favoring some form of public support for healthcare “socialist”? Hardly.
Here’s how I see it: Health care has similar effects on the entire economy to the highway system, the justice system, and national defense.
Each one is more than the sum of its parts. Done right, these “public goods” contribute more to economic activity than they cost. If you try to do these things individually, you sacrifice a lot of financial dynamism.
The typical argument, of course, is that public health care ends up rationed. We hear horror stories from Canadians or British in endless queues for medical procedures. (Of course, under a private system, there is also rationing … if you can’t afford it, you’re not in the queue at all.)
But a UK-style National Health Service is not the only option.
Many countries, including most of the Latin American nations favored by American retirees, have hybrid systems. The most common is to have a public system of primary and preventive care (neighborhood clinics where you can take your child with a cold or vaccinate him) and a private system for more advanced health needs. If you want to take out private insurance and go to a private hospital for surgery, nothing stops you. If you can’t afford it, you may have to queue for public attention.
But there are considerable advantages. First, we would avoid the job lockout, low rates of entrepreneurship, and delayed retirement. Second, the availability of low-cost primary and preventive care would reduce the incidence of long-term chronic conditions that end up costing us a lot of money when the uninsured show up to the emergency room – diabetes, heart disease, etc.