#165: Have another donut?

KRUGMAN TRUTH SQUAD

We are always surprised when Paul Krugman writes a column that is thoughtful and free of partisan cheap shots. In America's Failing Health (08/27/04) he comes pretty close and for the second time in recent memory, the topic of his thoughtfulness is health care. Health vs. Wealth (07/09/04) was the other one (see Squad Report #161). Here is the core of today's column:

"Clearly, health care reform is an urgent social and economic issue. But who has the right answer?
The 2004 Economic Report of the President told us what George Bush's economists think, though we're unlikely to hear anything as blunt at next week's convention. According to the report, health costs are too high because people have too much insurance and purchase too much medical care. What we need, then, are policies, like tax-advantaged health savings accounts tied to plans with high deductibles, that induce people to pay more of their medical expenses out of pocket. (Cynics would say that this is just a rationale for yet another tax shelter for the wealthy, but the economists who wrote the report are probably sincere.)
John Kerry's economic advisers have a very different analysis: they believe that health costs are too high because private insurance companies have excessive overhead, mainly because they are trying to avoid covering high-risk patients. What we need, according to this view, is for the government to assume more of the risk, for example by picking up catastrophic health costs, thereby reducing the incentive for socially wasteful spending, and making employment-based insurance easier to get.
A smart economist can come up with theoretical justifications for either argument. The evidence suggests, however, that the Kerry position is much closer to the truth."

[The Truth Squad is a group of economists who have long marveled at the writings of Paul Krugman. The Squad Reports are synopses of their discussions. ]