Transterrestrial Musings

Defend Free Speech!

Amazon Honor System Click Here to Pay

Site designed by

Powered by
Movable Type 4.0
Biting Commentary about Infinity, and Beyond!

« The First Space Hotel | Main | Back »

Anti-Krugman 2:
Single Horrible Payor

Paul Krugman today attempts to answer the question, "Why is the insurance industry growing rapidly, even as it covers fewer Americans?"

In 2005, the percent of uninsured was 15.9%. In 2000, it was 14.0%. In 2000, private insurers covered 72.4% of Americans or 204 million. In 2005, they covered 67.7% or 201 million.

Total number of covered individuals increased from 243 million to 249 million. From 2000-2005, the number employed rose from 137 million to 142 million. The number unemployed rose from 6 million to 8 million.

Could it be that we were experiencing a boom in 2001 and coverage peaked as a percent and that it will rise again if we have another boom with 4% unemployment? The percent of the population working has dropped from 67.1% to 66%.

Could it be that people are feeling secularly more healthy and feel like they can go without health insurance? Between 1999 and 2004, life expectancy at birth has risen from 76.7 years to 77.9 years. At least average health overall is improving by that indicator.

Could it be that the sector is over-regulated? CATO estimates that about 1/6 of daily uninsured would buy insurance if it was less heavily regulated. That would allow health care deregulation to take us from 15.9% to 13.3% uninsured and allow everyone else to save a total of $170 billion a year or $680 per covered individual per year or about 1.4% of GDP.

In short, insurers are covering more people. They are helping increase the average lifespan of all Americans. They are doing it despite a substantial burden of regulation.


Many of the uninsured are immigrants and illegal aliens. There were 8 million immigrants with a little under half of them illegal settled in the US between 2000 and 2005.

I would prefer health savings accounts to insurance. If people shop aggressively because they get to keep the last dollar they would spend on health care instead of having it heavily subsidized and pay only $0.20 on the dollar for their care like an old fashioned blue cross/blue shield plan, people would get much more value for their money. Krugman should know as an economist that if something is free it gets overused and ends up in shortage. If it is heavily subsidized, the value of the marginal dollar of use is equal to the price paid, not the cost. That is, at the margin we are wasting up to 80% of our spending. Health savings accounts--not single payor--will get us to stop wasting health service and start imposing market rigor on providers.

Single payor is a monopoly. We can't exit any more if we switch to single payor. I want choice. Choice breeds research and development and pain amongst bad care givers. Was phone service better value for the money under Ma Bell? Competition is good. Don't squander it.

Krugman also states:

Every other wealthy nation manages to provide almost all its citizens with guaranteed health insurance, while spending less on health care than we do. And there’s no mystery why: we’re paying the price for pointless, destructive reliance on private insurers. Medicare, which is a universal health insurance program for older Americans, spends less than 2 cents of every dollar on administrative costs, leaving 98 cents to pay for medical care. By contrast, private insurance companies spend only around 80 cents of each dollar in premiums on medical care; much of the remaining 20 cents is spent denying insurance to those who need it.

That 2% of every dollar on administrative costs is suspicious. Merely complying with the payroll tax code costs employers $100 billion or 6% out of $1.6 trillion collected. That's nearly 1% of GDP. I can attest as an employer that I do spend about a few minutes every week filling out federal tax, medicare and unemployment withholding amounts and some hours at tax time compiling them all. I would prefer if there were just one line for what the feds got instead of several for the employee and several for the employer.

What good are other countries health care "guarantees"? Canada has a life expectancy at birth of 80.2 according to the CIA World Fact Book for the entire population. That's over two years higher than the US at 77.9. So far so good. On the other hand, our per capita GDP is $42k to their $34k. Would you rather get an extra two years or an extra $500k to live on while you are alive? People vote with their feet. There are 678,000 in the US born in Canada. About twice as many people come to live in the US born in Canada as to move to live in Canada from the US. That makes a Canadian about 20 times as likely to come to live in the US as a US person to come to live Canada because Canada is 1/9 the population.

I agree with Krugman that bankrupting people to get them to qualify for free care is not such a good system. I would use market means to obtain provider of last resort health savings account services for the tweeners who don't qualify for government care. I would shift from extreme regulation to a free market and instead of free medicare services give people access to low interest government loans. The Government loans could survive bankruptcy and the payments on the loans deducted from tax refunds and social security payments.

One parting cheap shot. Krugman started with “When Steve and Leslie Shaeffer’s daughter, Selah, was diagnosed at age 4 with a potentially fatal tumor in her jaw, they figured their health insurance would cover the bulk of her treatment costs.” But “shortly after Selah’s medical bills hit $20,000, Blue Cross stopped covering them and eventually canceled her coverage retroactively.” quoted from LA Times and later said "you do wonder how the people who cut off the Schaeffers can look themselves in the mirror".

The next paragraph of the LA Times article says "The company accused the Shaeffers of failing to disclose in their coverage application an undiagnosed bump on Selah's chin and physician visits for croup. Had that been disclosed, the company said in a letter, it would not have insured Selah."

Perhaps the doctor did know that the bump was potentially fatal and told the Schaeffers to go out and get insurance, wrote something inconclusive and told the family to get a second opinion. If so, can the doctor look in the mirror? It would be theft from the rich to give to the poor, just like if BC/BS employee violated company policy. How can Krugman look himself in the mirror for condoning grand theft? And what makes Krugman more special than BC/BS? How can Krugman look himself in the mirror for not writing the Schaeffers a check on the spot personally?

Leave a comment

Note: The comment system is functional, but timing out when returning a response page. If you have submitted a comment, DON'T RESUBMIT IT IF/WHEN IT HANGS UP AND GIVES YOU A "500" PAGE. Simply click your browser "Back" button to the post page, and then refresh to see your comment.

About this Entry

This page contains a single entry by Sam published on September 22, 2006 3:10 PM.

The First Space Hotel was the previous entry in this blog.

Back is the next entry in this blog.

Find recent content on the main index or look in the archives to find all content.

Powered by Movable Type 4.1