Krugman: Government Does Health Insurance Better

The New York Times
April 10, 2015
Where Government Excels
By Paul Krugman

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.

And there’s another major example of government superiority: providing retirement security... (more here).

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Comment by Don McCanne of PNHP

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?

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