Gunter Grass, winner of the Nobel Prize in Literature in 1999, reflects on the 60-year anniversary of the German Reich's surrender in an op-ed piece in today's New York Times. ("The Gravest Generation.") He concludes with the "hope" that
Among first-world nations, the ideology referred to may be more dominant in the U.S. than in any other. And the person most ably exposing its blindness to reason may be economist Paul Krugman[1]:
The United States spends far more on health care than other advanced countries. Yet we don't appear to receive more medical services. And we have lower life-expectancy and higher infant-mortality rates than countries that spend less than half as much per person. How do we do it?
An important part of the answer is that much of our health care spending is devoted to passing the buck: trying to get someone else to pay the bills.
According to the World Health Organization, in the United States administrative expenses eat up about 15 percent of the money paid in premiums to private health insurance companies, but only 4 percent of the budgets of public insurance programs, which consist mainly of Medicare and Medicaid. The numbers for both public and private insurance are similar in other countries - but because we rely much more heavily than anyone else on private insurance, our total administrative costs are much higher.
According to the health organization, the higher costs of private insurers are "mainly due to the extensive bureaucracy required to assess risk, rate premiums, design benefit packages and review, pay or refuse claims." Public insurance plans have far less bureaucracy because they don't try to screen out high-risk clients or charge them higher fees.
And the costs directly incurred by insurers are only half the story. Doctors "must hire office personnel just to deal with the insurance companies," Dr. Atul Gawande, a practicing physician, wrote in The New Yorker. "A well-run office can get the insurer's rejection rate down from 30 percent to, say, 15 percent. That's how a doctor makes money. ... It's a war with insurance, every step of the way."
Isn't competition supposed to make the private sector more efficient than the public sector? Well, as the World Health Organization put it in a discussion of Western Europe, private insurers generally don't compete by delivering care at lower cost. Instead, they "compete on the basis of risk selection" - that is, by turning away people who are likely to have high medical bills and by refusing or delaying any payment they can.
Yet the cost of providing medical care to those denied private insurance doesn't go away. If individuals are poor, or if medical expenses impoverish them, they are covered by Medicaid. Otherwise, they pay out of pocket or rely on the charity of public hospitals.
So we've created a vast and hugely expensive insurance bureaucracy that accomplishes nothing. The resources spent by private insurers don't reduce overall costs; they simply shift those costs to other people and institutions. It's perverse but true that this system, which insures only 85 percent of the population, costs much more than we would pay for a system that covered everyone.
And the costs go beyond wasted money.
First, in the U.S. system, medical costs act as a tax on employment. For example, General Motors is losing money on every car it makes because of the burden of health care costs. As a result, it may be forced to lay off thousands of workers, or may even go out of business. Yet the insurance premiums saved by firing workers are no saving at all to society as a whole: somebody still ends up paying the bills.
Second, Americans without insurance eventually receive medical care - but the operative word is "eventually." According to Kaiser Family Foundation data, the uninsured are about three times as likely as the insured to postpone seeking care, fail to get needed care, leave prescriptions unfilled or skip recommended treatment. And many end up disabled - or die - because of these delays.
Think about how crazy all of this is. At a rough guess, between two million and three million Americans are employed by insurers and health care providers not to deliver health care, but to pass the buck for that care to someone else. And the result of all their exertions is to make the nation poorer and sicker.
Why do we put up with such an expensive, counterproductive health care system? Vested interests play an important role. But we also suffer from ideological blinders: decades of indoctrination in the virtues of market competition and the evils of big government have left many Americans unable to comprehend the idea that sometimes competition is the problem, not the solution.
This week yet another report emphasized just how bad a job the American system does at providing basic health care. A study by the Robert Wood Johnson Foundation estimates that 20 million working Americans are uninsured; in Texas, which has the worst record, more than 30 percent of the adults under 65 have no insurance.
And lack of insurance leads to inadequate medical attention. Over a 12-month period, 41 percent of the uninsured were unable to see a doctor when needed because of cost; 56 percent had no personal doctor or health care provider.
Our system is desperately in need of reform. Yet it will be very hard to get useful reform, for two reasons: vested interests and ideology.
I'll have a lot more to say about vested interests and health care in future columns, but let me emphasize one key point: a lot of big companies are essentially in the business of wasting health care resources.
The most striking inefficiency of our health system is our huge medical bureaucracy, which is mainly occupied in trying to get someone else to pay the bills. A good guess is that two million to three million Americans are employed by insurers and health care providers not to deliver health care, but to pass the buck to other people.
Yet any effort to reduce this waste would hurt powerful, well-organized interests, which have already demonstrated their power to block reform. Remember the "Harry and Louise" ads that doomed the Clinton health plan? The actors may have seemed like regular folks, but the ads were paid for by the Health Insurance Association of America, an industry lobbying group that liked the health care system just the way it was.
But vested interests aren't the only obstacle to fixing our health care system. We also have a big problem with ideology.
You see, America is ruled by conservatives, and they have a private obsession: they believe that more privatization, not less, is always the answer. And their faith persists even when the evidence clearly points to a private sector gone bad.
I could cite many examples of this obsession at work. But a particularly good illustration of ideology-induced obliviousness is the 2004 Economic Report of the President, which devotes a whole chapter to health care that can be read as a sort of conservative manifesto on the subject.
The main message of that report is that U.S. health care is doing just fine. Never mind the huge expense, the low life expectancy, the high infant mortality; it's a market-based system, so it must be good.
The report even takes a Panglossian view of uninsured Americans - one that is completely at odds with the grim statistics I cited above - suggesting that "many of them may remain uninsured as a matter of choice," perhaps because "they are young and healthy and do not see the need for insurance."
The president's economists had only one criticism of the system: insurance is too comprehensive, which encourages people to consume too much health care. As they see it, insurance covers too large a percentage of medical costs. The answer to this problem is the creation of, you guessed it, private accounts, which have now superseded tax cuts as the answer to all problems.
Indeed, a new paper by Martin Feldstein of Harvard, which clearly reflects the administration's views, suggests that Social Security privatization and health savings accounts - tax shelters designed to encourage people to pay medical costs out of their own pockets - are only the beginning. "Investment-based personal accounts," he says, are the way to go for unemployment insurance and Medicare, too.
O.K., let's not turn this into a Bush-bashing session. President Bush didn't cause the crisis in American health care. His health care policies have made things only a little bit worse.
The point, instead, is that even though all the evidence suggests that we would be much better off under a system of universal coverage, any such move will be fiercely opposed, on principle, by conservatives who want us to move in the opposite direction.
And reform will also be opposed by powerful vested interests - my next subject in this series....
[Excerpted from "Passing the Buck," April 22, 2005, and "A Private Obsession," April 29, 2005; both written by Paul Krugman and appearing in The New York Times.]