Voodoo Health Economics By PAUL KRUGMAN

[Guest guest]

April 4, 2008 Op-Ed Columnist

Voodoo Health Economics By PAUL KRUGMAN

has cancer. McCain has had cancer in the past.

Last weekend, Mrs. bluntly pointed out that neither of them

would be able to get insurance under Mr. McCain's health care plan.

It's about time someone said that and, more generally, made the case

that Mr. McCain's approach to health care is based on voodoo economics

— not the supply-side voodoo that claims that cutting taxes increases

revenues (though Mr. McCain says that, too), but the equally foolish

claim, refuted by all available evidence, that the magic of the

marketplace can produce cheap health care for everyone.

As Mrs. pointed out, the McCain health plan would do nothing

to prevent insurance companies from denying coverage to those, like

her and Mr. McCain, who have pre-existing medical conditions.

The McCain campaign's response was condescending and dismissive — a

statement that Mrs. doesn't understand the comprehensive

nature of the senator's approach, which would harness " the power of

competition to produce greater coverage for Americans, " reducing costs

so that even people with pre-existing conditions could afford care.

This is nonsense on multiple levels.

For one thing, even if you buy the premise that competition would

reduce health care costs, the idea that it could cut costs enough to

make insurance affordable for Americans with a history of cancer or

other major diseases is sheer fantasy.

Beyond that, there's no reason to believe in these alleged cost

reductions. Insurance companies do try to hold down " medical losses " —

the industry's term for what happens when an insurer actually ends up

having to honor its promises by paying a client's medical bills. But

they don't do this by promoting cost-effective medical care.

Instead, they hold down costs by only covering healthy people,

screening out those who need coverage the most — which was exactly the

point Mrs. was making. They also deny as many claims as

possible, forcing doctors and hospitals to spend large sums fighting

to get paid.

And the international evidence on health care costs is overwhelming:

the United States has the most privatized system, with the most market

competition — and it also has by far the highest health care costs in

the world.

Yet the McCain health plan — actually a set of bullet points on the

campaign's Web site — is entirely based on blind faith that

competition among private insurers will solve all problems.

I'd like to single out one of these bullet points in particular — the

first substantive proposal Mr. McCain offers (the preceding entries

are nothing but feel-good boilerplate).

As I've mentioned in past columns, the Veterans Health Administration

is one of the few clear American success stories in the struggle to

contain health care costs. Since it was reformed during the Clinton

years, the V.A. has used the fact that it's an integrated system — a

system that takes long-term responsibility for its clients' health —

to deliver an impressive combination of high-quality care and low

costs. It has also taken the lead in the use of information

technology, which has both saved money and reduced medical errors.

Sure enough, Mr. McCain wants to privatize and, in effect, dismantle

the V.A. Naturally, this destructive agenda comes wrapped in the flag:

" America's veterans have fought for our freedom, " says the McCain Web

site. " We should give them freedom to choose to carry their V.A.

dollars to a provider that gives them the timely care at high quality

and in the best location. "

That's a recipe for having healthy veterans drop out of the system,

undermining its integrated nature and draining away resources.

Mr. McCain, then, is offering a completely wrongheaded approach to

health care. But the way the campaign for the Democratic nomination

has unfolded raises questions about how effective his eventual

opponent will be in making that point.

Indeed, while Mrs. focused her criticism on Mr. McCain, she

also made it clear that she prefers Hillary Clinton's approach — " Sen.

Clinton's plan is a great plan " — to Barack Obama's. The Clinton plan

closely resembles the plan for universal coverage that

laid out more than a year ago. By contrast, Mr. Obama offers a

watered-down plan that falls short of universality, and it would have

higher costs per person covered.

Worse yet, Mr. Obama attacked his Democratic rivals' health plans

using conservative talking points about choice and the evil of having

the government tell you what to do. That's going to make it hard — if

he is the nominee — to refute Mr. McCain when he makes similar

arguments on behalf of such things as privatizing veterans' care.

Still, health care ought to be a major issue in this campaign. I

wonder if we'll have time to discuss it after we deal with more

important subjects, like bowling and basketball.

http://www.nytimes.com/2008/04/04/opinion/04krugman.html