Wednesday, July 11, 2007

National Health Care and Free Market Principles

One comment we are hearing from the right-wing these days regarding national health care plans is roughly what Rudy Giuliani said the other night in one of the debates: "Free market principles are the only things that reduce costs and improve quality." Not only does this point fail to account for the fact that U.S. spends far more on health care than any other country, i.e., those other countries that do not rely on free market principles for their programs, and yet it ranks 37th in quality of care (according to the World Health Organization). New research from the Johns Hopkins Bloomberg School of Public Health shows just how much more we are paying for our sub-par health care:
The study authors reviewed health care spending data on 30 countries from the Organization for Economic Cooperation and Development (OECD) for the year 2002. U.S. citizens spent $5,267 per capita on health care. The country with the next highest per capita expenditure, Switzerland, spent $3,446 per capita. The median OECD country spent $2,193 per capita.
Having noted this fact, let's consider a few further costs associated with our system that even our Milton Friedman fans should appreciate. (I'm indebted to Kevin Drum and Matthew Yglesias for much of the following.)

The main point is to note how restrictive our system is for economic freedom and mobility. In our system, people dare not risk changing jobs for fear of losing coverage or being denied coverage for a pre-existing condition (it is common for group health plans to limit or deny coverage for pre-existing conditions during an initial period). The same goes for returning to school for a year to improve one's job skills or leaving to start a new business. The risks often outweigh the potential benefits for the individual and, moreover, for the economy as a whole. (Better workers and innovative businesses add economic value to the marketplace.) Individuals miss good opportunities because of these health-related concerns and thereby so does business world.

Speaking of small businesses, they are having a hard time competing in the marketplace because decent health care plans are often prohibitively expensive to attract the best employees. Even large businesses are finding it difficult to keep up with rapidly rising health care rates. The auto industry in the U.S., for one, continues to struggle in no small measure because of the health-care constraint on their budgets as compared to their counterparts in other countries with national health care for their workers.

From the corporate level down to the individual level, we have a system that creates anxiety--about corporate bankruptcy from a payroll bloated with insurance premiums or individual bankruptcy from a catastrophic illness that an HMO refuses to cover. As a result, this anxiety impedes economic investment and labor market flexibility. In spite of what Rudy Giuliani might say, national health care serves our economic interests precisely because it is (or ought to be) a free market principle, or, to put it in the language of transcendental philosophy, national health care is a condition for the possibility of a free market economy.


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