Monday, November 05, 2007

Greg Mankiw on Health Care

Greg Mankiw has an Op-Ed on health care over at the NY Times. The thrust of his piece is that we need to take a breath before we rush into health care reform because things aren't as bad as they seem. I disagree with the general thrust of the piece if not the particulars. He takes issue with three different aspects of the health care debate.

The first issue is the tendency of health care wonks to point out the higher life expectancy of other OECD countries and attribute this to health care delivery. Mankiw says that this is actually explained by higher automobile and crime fatalities.

The second issue Mankiw addresses is the number of Americans that are uninsured. The number that is constantly cited is 47 million. Now, he complains that this is misleading, which it is, for a variety of reasons. This includes folks that are eligible for medicaid (for whom enrollment is retroactive from an injury or illness), illegal immigrants, and those who make over $50,000 (i.e. who are in the top half of income distribution). Again, all of this is correct and if we look at those that are chronically uninsured, it is a significantly smaller number. I guess the bigger issue is to analyze why this group is chronically insured, my guess is they make enough not to be eligible for medicaid but have pre-existing conditions which make them unisurable risks. The liberal solution is to impose community ratings, I would much prefer federal catastrophic re-insurance program which would make this group insurable.

The third issue Mankiw addresses is the complaint that health care is consuming and will consume an ever greater portion of GDP. He rightly says that as we are more prosperous the consumption of health as opposed to things will increase. I agree with this but he is a bit glib in his dismissal of this criticism. It is one thing to accept that health care will and should rise as a percentage of GDP, but another to fail to recognize the inherent waste in the modern system of health care finance and delivery. Our system encourages the consumption of care regardless of its effectiveness (both in terms of cost and health outcome). This is where other countries exceed us. They exceed us because they have a mechanism to say no to the patient- the government. I am extremely doubtful that our government would be able to similarly serve this function, and thus far insurers have failed in this capacity as well. I think the only way to do this is to push more responsibility on the consumer himself by treating employer provided health care as income.

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