The US should have universal public health care

I have been resisting writing about the US health care fiasco because frankly the whole debate is a fiasco and demonstrates the ability of mainstream economics to obscure a widespread understanding of how the monetary system operates and the opportunities that system provides a currency-issuing government. But I have had more E-mails on this topic over the last few weeks than most other issues (bar EMU). Most readers want some analysis from a Modern Monetary Theory (MMT) perspective and so here it is. If only to stop the E-mails.

To start with here is a personal message to all the fine American readers of my blog (there are thousands). I live in a nation where I can ride my bike for hundreds of kms unimpeded although I do have to wear a helmet these days as a result of invasive law changes. I live near the beach and can go and surf the waves whenever there are some as free as a bird. I walk the street each day without fear of arrest and interrogation.

I even criticise the national government relentlessly on national media and no-one comes round in the dead of the night to take me away. I can travel where I like (mostly). The citizens can toss a government out of office if they do not like them at regular (relatively short-spaced) intervals.

The only time I see the Australian army is on TV when the news shows them getting shot up in far of lands where they have no place to be.

I have to stop at red lights but consider that probably is a health issue rather than an infringement on my civil liberties. Which brings me to the next point …

I live in a system with universal health care where the poorest Australian can access first-class medical and hospital services on demand. It is not perfect and there are significant inefficiencies in certain areas mostly involving private insurers and greedy medical professionals. But overall it works fine.

This health system hasn’t turned Australia into a totalitarian state. The material means of production are mostly privately owned. And even though I agree with Marx, that capitalism represents the chimera of freedom … we do not live under the oppressive iron glove of a dictator – communist or otherwise!

So when President Obama’s health changes were passed the other day, the reaction among some was idiotic. I got this retweet which was originally tweeted by one Solly Forell who calls himself a conservative American blogger:

ASSASSINATION! America, we survived the Assassinations and Lincoln & Kennedy. We’ll surely get over a bullet to Barrack Obama’s head.

Some reaction to a piece of legislation that hands over billions in public funds to corrupt and powerful private health insurers.

Even the right-wing News Limited press in Australia, which is usually rabid on these matters, noted in relation to President Obama’s health changes:

On the lunar Right, claims that the legislation follows the mindsets of Lenin, Stalin and Kim Jong-il are equally wide of the mark.

Problems with US health care

Now here are some questions.

How many people die in Australia because they cannot access health care? Answer: probably none.

How many people die in the US per year – the richest nation on Earth – because they cannot access health insurance? Answer: 45,000 (Source). The last figure came from a study published by the American Journal of Public Health and conducted by the Harvard Medical School and Cambridge Health Alliance.

The Harvard study also found that “(u)ninsured, working-age Americans have 40 percent higher death risk than privately insured counterparts” and this was “up from a 25 percent excess death rate found in 1993”. Their research demonstrates that “(d)eaths associated with lack of health insurance now exceed those caused by many common killers such as kidney disease”.

The two introductory questions were different – one related to health care (Australia) the other to health insurance (USA). These differences are telling.

For in the US the “increase in the number of uninsured and an eroding medical safety net for the disadvantaged likely explain the substantial increase in the number of deaths, as the uninsured are more likely to go without needed care”.

So if you are not insured you are unlikely to be able to access health care when needed. All Australians can access health care when they need it. The USA is also the only advanced nation that does not provide universal health coverage.

A further problem with the US system is that it defies the health care principle that early intervention is the best strategy. It is clear in the US that uninsured people cannot get basic screening examinations and/or simple pharmaceutical remedies and they have to wait until they are near death before they get treated. At that stage the overall imposition on real resources is disproportionately higher.

Health and financial risk management is also highly related. Poor health can lead to poverty in the richest nation in the World. Another Harvard Medical School study found that:

… the medical bankruptcy rate rose from 46.2% in 2001 to 69.1% in 2007 – a 49.6% increase. This is clear evidence that health care is becoming less affordable to American families, including American families with health insurance.

Medical bankruptcies contribute to “more than half of all bankruptcies and homes lost due to foreclosures”.

The problem with the US system is that the health care providers run the system and can push whatever charges they can get away with. Regulation and public competition is desperately needed.

Another study by the Harvard Medical School found that:

… administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada.

So this is just gouging – management fees

ABC economics commentator Stephen Long had an interesting article this week (March 23, 2010) entitled – What’s wrong with the Obama healthcare plan? and concluded that:

The United States is the only rich nation that lacks universal healthcare coverage. In the world’s most affluent country, tens of millions of people can’t afford to see a doctor or have an operation. It has by far the most expensive healthcare system in the world yet its health outcomes are poor.

While Americans outlay a much larger percentage of their GDP on healthcare (nearly twice as much as Australia) its “adult mortality rate is almost twice as high”.

The following graph shows total health expenditure as a percentage of GDP from 1971 to 2007 in the left-panel and in $US purchasing power parity terms in the right-panel. The OECD provide an excellent health dataset which I have used here.

The data shows that broadly the nations selected (and Denmark is representative of Europe) have comparable outlays on health and the US is a very significant outlier.

The OECD data has also just added public health outlays to their suite which is interesting. The following graph shows public health expenditure per capita from 1971 to 2007 on a $US purchasing power parity basis. So public health spending in the US per capita is not as much an outlier. So the major discrepancies in the graphs above reflect private spending. Private Americans spend a lot on health care overall.

Is it working? Well I don’t intend to undertake a complete analysis here but the OECD data does provide health risk facts. An obvious one is the percentage of obese citizens in the population. The following table shows these percentages for the last observation available. So private Americans are very much fatter and spend more on health care than the other representative nations, which could, of-course, be causal (_: [<= joke]. But it suggests that the health care debate is better fought on lifestyle grounds than fiscal grounds where the discussion is largely irrelevant as we will see.

Long says that there are several reasons for the poor health outcomes:

They include entrenched under-privilege and high rates of preventible disease among the black and hispanic populations and the American love affair with junk food – extremely hard things to change. Then there’s the huge expense and inefficiency of privatised, financialised care. Health insurance companies run for profit grossly inflate the cost of medical care in the United States.

While somewhat lateral, the following graph also suggests something about the national priorities of the US. It shows total military spending in the US as a percentage of GDP. Information from the Stockholm International Peace Research Institute (SIPRI). Again the US is an outlier.

The SIPRI conclude that:

There is a large gap between what countries are prepared to allocate for military means to provide security and maintain their global and regional power status, on the one hand, and to alleviate poverty and promote economic development, on the other.

The Obama health care changes

President Obama’s reform package is so flawed that it will do very little to redress the health care disadvantages in the US.

Stephen Long says that:

The Obama administration intends to create tens of millions of new customers for the insurers by subsidising Americans on low and middle incomes to take out policies. President Obama’s healthcare system is flawed in its basic design. It’s being billed as a historic reform but it actually entrenches a failed status quo. His “reforms” are designed to push more people into private health insurance. But the centrality of private health insurers is part of the problem in the United States, not the solution …

The administration is hoping to push down the costs of healthcare coverage, but it’s hard to see how its measures will achieve that aim without compromising care and disadvantaging citizens.

My sometime co-author Randy Wray also noted that getting more insurance coverage doesn’t mean they will get more “care paid for”. This is an important issue when the providers run the system with little regulative checks and an absence of competition. He says that people:

… will get hit with deductions, co-pays, annual limits (for several more years), exclusions, out of pocket expenses. This will ensure that health CARE remains too expensive to actually take advantage of their new INSURANCE. And many currently insured people are going to get higher taxes. Premiums will rise. Government is going to shovel more of the costs to you. Wall Street needs your money …

We don’t need more health insurance. We need less. We need health provision; and we need to get it out of the hands of Wall Street.

The US government has also let the pharmaceutical industry off scott free. These drug companies make huge profits and actively undermine cheaper preventative alternatives. The history of ulcer treatment is a classic case of this. The drug companies were happier that people took Z… for the rest of their lives and tried to prevent the knowledge that ulcers can be treated with anti-biotic medicine and permanently eliminated from gaining traction in the medical profession. Eventually, the Australian discovery became standard treatment but not without a huge resistance from the traditional drug suppliers.

The big US drug companies are also trying undermine Australia’s publicly-subsidised pharmaceutical program where they have to supply at prescribed prices to get the subsidy (which means that they cannot gouge the local market excessively). They are arguing that under the ridiculous Free Trade agreement the two governments signed a few years back such regulations are a restraint of trade. They will lose because the Australian government will rip up the agreement before they would dare face the wrath of the voters here.

But by not taking on the pharmaceutical companies, the American government has side-stepped a major issue. They would do well to study the Australian scheme, which is imperfect but operational and contains the profits in this sector.

What the US reforms should have delivered a fully national free public hospital and medical system. That is the system that I can access 24 hours a day over here.

All Obama has really done is to extend private health insurance to 95 per cent of his citizens instead of 85 odd per cent (Source: US Census Bureau)

Sure enough the companies will be prevented from denying anyone coverage for pre-existing conditions so that families with sick children will now be able to get coverage. The companies will also not be able to deny insurance to a person once they become ill. Both of these changes are helpful.

But what was needed was a fully public health insurance system which Australia enjoys. My preference overall is to wipe out the private insurers. They are as sneaky in Australia as they are in the US – always seeking to avoid payment and would go out of business if they were not subsidised through fiscal policy.

The previous conservative Australian government tried to get rid of the public health system by forcing more and more people into private insurance schemes. At the time of the policy change, membership in private funds was falling dramatically as people preferred the public health system. The response from the government was to subsidise the membership fees even for the highest earners and impose higher tax penalties on those who resisted. But it still remains that there is a significant public system which I can access whenever I need to.

Health care as a rights agenda

So not only is there a major difference in priorities in the US in terms of using real GDP for health care, the access to it is is highly skewed in favour of the high income earners and wealthy.

Now in a so-called “free” nation (although that is questionable when applied to the US), people can spend their incomes the way they like subject to agreed rules relating to things like what is legal and what is not. But that means if you want to increase access to health care you have to rely on the public sector to achieve that goal. There are very good reasons why the public sector should take a central responsibility in this regard.

I go along with the sentiments expressed in the major international treaties. The UN Human Rights Declarations includes that everyone has a right to work and it is government’s responsibility to ensure that right is realised. When I developed the Job Guarantee concept in 1978 I was motivated by that charter.

The constitution of the World Health Organisation says:

The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without the distinction of race, religion, political belief, economic or social condition.

So I see this debate as part of the overall “rights agenda”. Which points to the central role of the public sector.

Last time I looked, and the Americans among us should be able to recite it chapter and verse, the Declaration of Independence says:

… all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these rights are life, liberty and the pursuit of happiness.

Now we can add the other gender and dispense with the religious fundamentalism but I read this as a statement which says that health care is an inalienable human right for all Americans under the constitution.

So I don’t even see this as a progressive (left) issue. But it is the public’s responsibility – in my opinion – to ensure that all people have access to a job, high quality education and high quality health care. To me that is a hallmark of a sophisticated nation that is maximising the potential of its citizens. It is clear to me that the US government to date has deliberately overseen a system that wastes the potential of a huge number of its citizens to the detriment of the individuals and the nation as a whole.

The fiscal debate

There has clearly been a strong health industry lobby trying to derail any move to a fully-funded public system of universal health care so as to protect their dominance in the sector.

But the fears that there will be a fiscal blow out and Americans will live in high-taxed penury forever because some latinos or blacks are getting health care now has also driven the debate.

From a MMT perspective, the fiscal component of the debate is irrelevant.

A typical bogus attack is that (Source):

… it is likely to come at a heavy cost to the soaring US federal budget deficit … What is beyond dispute is that after the global financial crisis and the bailout of the banking system, the US budget deficit is 10 per cent of GDP and is piling up a compounding interest bill for future generations. Regardless of whatever savings can be made through health reform, extending insurance cover to a further 32 million people is likely to add substantially to the deficit, carrying a serious risk of undermining the strength of the US economy. Critics also fear that over time, the impact of the bill will include higher insurance premiums and poorer quality of healthcare. Such serious concerns will need to be monitored, but would be difficult to address.

Response: What is a heavy cost? What is a soaring deficit? These are irrelevant concepts devoid of meaning.

Once you run a rights agenda then the only sensible health care option is a universal public system. Within this rights framework the idea of “making profit” maintaining a human right starts to look odd. Under the rights agenda, no-one should become impoverished because they lose their job or because they fall ill. I would eliminate private providers altogether.

But this is not likely to happen any time soon. In that context, the public sector has to create a universal system and operate within it as a provider to maintain competitive discipline on the private segment with significant regulative restrictions on the latter assisting in keeping the real costs of the system down and maintain equity access.

The only way that these sorts of debates will progress, however, is to take them out of the fiscal policy realm where they are largely inapplicable and start talking about rights and what different interpretations of these rights concepts have for real resources allocations and redistributions.

Whether a nation can afford first-class health care depends only on the real resources that are available. The US can clearly afford that level of care for all of its citizens. There is never financial constraint on the national government (where it is sovereign) from providing that level of health care. Subject to real resource availability, the only issue then is political.

The idea that the public fiscal position has to “seek savings” to make fund future spending (on health care and other programs) is a fundamental misconception that is often rehearsed in the financial and popular media.

This misconception has been driving the so-called intergenerational debate where governments are being pressured to run surpluses to pay for the retirement of baby boomers and the growing healthcare costs for them as they age further.

MMT demonstrated categorically that public surpluses do not create a cache of money that can be spent later. Currency-issuing governments spend by crediting bank accounts. There is no revenue constraint on this act. Government cheques don’t bounce!

Additionally, taxation consists of debiting a bank account. The funds debited are ‘accounted for’ but don’t actually ‘go anywhere’ nor ‘accumulate anywhere’.

The concept of pre-funding future liabilities does apply to fixed exchange rate regimes, as sufficient reserves must be held to facilitate guaranteed conversion features of the currency. It also applies to non-government users of a currency. Their ability to spend is a function of their revenues and reserves of that currency.

In fact, the pursuit of budget surpluses by a sovereign government as a means of accumulating ‘future public spending capacity’ is not only without standing but also likely to undermine the capacity of the economy to provide the resources that may be necessary in the future to provide real goods and services of a particular composition desirable to an ageing or sick population.

By achieving and maintaining full employment via appropriate levels of net spending (deficits) the Government would be providing the best basis for growth in real goods and services in the future. In a fully employed economy, the intergenerational spending decisions on pensions and health come down to political choices sometimes constrained by real resource availability, but in no case constrained by monetary issues, either now or in the future.

All governments should aim to maintain an efficient and effective medical health system. Clearly the real health care system matters by which we mean the resources that are employed to deliver the health care services and the research that is done by universities and elsewhere to improve our future health prospects. So real facilities and real know how define the essence of an effective health care system.

Clearly maximising employment and output in each period is a necessary condition for long-term growth. It is important then to encourage high labour force participation rates and maintain job opportunities for older workers. There is a strong correlation between unemployment and health problems.

Anything that has a positive impact on the dependency ratio is desirable and the best thing for that is ensuring that there is a job available for all those who desire to work.

But this is about political choices rather than government finances.

The ability of government to provide necessary goods and services to the non-government sector, in particular, those goods that the private sector may under-provide is independent of government finance. Any attempt to link the two via erroneous concepts of fiscal policy ‘discipline’, will not increase per capita GDP growth in the longer term.

The reality is that fiscal drag that accompanies such ‘discipline’ reduces growth in aggregate demand and private disposable incomes, which can be measured by the foregone output that results. Fiscal austerity does help low inflation because it acts as a deflationary force relying on sustained excess capacity and unemployment to keep prices under control. Fiscal discipline is also claimed to increase national savings but this equals reduced non-government savings, which arguably is the relevant measure to focus upon.

Please read the following blogs – Deficit spending 101 – Part 1Deficit spending 101 – Part 2Deficit spending 101 – Part 3 – for further information on these points.

An aside

While I fully support public provision to ensure everyone has access to a job and also to health care I also have a philosophical position that a lot of people on the left do not share that citizens also have to exhibit reciprocal responsibility. That is, I do not support income support for those that can work (the ill, the aged, the disabled clearly cannot work).

In relation to health care, I see reciprocal responsibility taking the form of attention to fitness and diet. The issues that then arise in this context include – should a person who has not demonstrated basic nutritional discipline and is obese or a person who smokes cigarettes be afforded free health care?

The issue is vexed and I haven’t time today to explore it any further here. But the hint to my opinion lies in the concept of reciprocal responsibility subject to being able to receive adequate public education etc.

Ultimately, before the flame throwers come from the left field – I would never deny anyone first-class public health care if they needed it. But if they had adequate income then I might charge them a levy if they had been irresponsible!


Once you run a rights agenda then the only sensible health care option is a universal public system. I would eliminate private providers altogether. But given this will not happen in many places, the public segment has to maintain competitive discipline on the private segment with significant regulative restrictions on the latter to help.

The only way that these sorts of debates will progress, however, is to take them out of the fiscal policy realm where they are largely inapplicable and start talking about rights and what different interpretations of these rights concepts have for real resources allocations and redistributions.

Whether a nation can afford first-class health care depends only on the real resources that are available. The US can clearly afford that level of care for all of its citizens. There is never financial constraint on the national government (where it is sovereign) from providing that level of health care. Subject to real resource availability, the only issue then is political.

Saturday Quiz

There was too much boasting this week both publicly and via private E-mails about the improving scores. I won’t tolerate that sort of idle self-promotion. Tomorrow’s quiz which will appear sometime will be brutal (-: [<= joke] That is enough for today!

This Post Has 21 Comments

  1. Terrific post. I agree with pretty much everything you wrote. However, as a thought experiment, I decided to put on an American thinking cap. It has long puzzled me how the wealthiest country on earth could manage not to provide universal health care to its citizens. I thought the cap might help me understand. Within minutes of putting it on, my perspective altered mindbendingly. This is what I came up with while under the influence:

    First, although the finding that 45,000 people a year die in the US due to lack of access to health care is shocking, and might seem to provide a convincing reason for providing universal health care, such an argument fails to recognize that evil redistribution would be required to prevent it. It’s not that 45,000 deaths are a good thing, but sometimes it is necessary to accept the lesser of two evils. Harvard Professor Gregory Mankiw wrote that economics is about tradeoffs.

    Second, the same goes for comparisons of cost. As long as the wealthiest get most out of the system, it’s not clear to me how cost comparisons between countries could be relevant. This is especially true if the lower costs would only come through a reduction in net benefits for the wealthiest. Efficiency is important, but fairness matters too. Perhaps Australians are more callous in this regard.

    Third, I’m not sure the criticism of private insurers takes into account that it is easier for private corporations to impose price hikes on sick people than healthy people. Missing this opportunity would seem inefficient. And public provision could inhibit financial capital in its intraclass war with productive capital. The current system imposes high costs on productive capital. Why would we want to mess with that?

    Fourth, the appeal to health care as a right is difficult to get my American thinking cap around because it is not a property right. Is it even possible to define a non-property-right right? It seems nonsensical. It’s the property that gives you the right to things such as health care. So property rights seem necessary and sufficient as far as rights go. If I am interpreting correctly, the quotation “… all men are created equal … etc.,” is misapplied, since God intended this statement to apply only to men of property. Back then, women and children were the property of the man, and so were covered by the man’s property right. There was no need for a separate right for women and children. Modern times are enlightened – or apostate – depending on the American thinking cap I wear. These days, men, women and children have the right to health care if they can afford it.

    Fifth, the appeal to MMT and the policy freedom available to the US government as monopoly issuer of its own fiat currency seems plain dangerous. I’m not sure if you have what we call fiscal policy in Australia, but over here we have it, and the socialist Obama administration has used it to blow the budget into massive deficit. As a result, we are weighed down by ballooning debt (it’s heavier than it sounds) and the tyranny of communist controls on Wall Street. The last thing we need is for the government to print its way into hyperinflation, triple-digit interest rates, and a crippling burden on future generations.

    ^^^^ (-: joke!) 🙂

  2. I agree that the MMT contribution is primarily to set the record straight about the options that properly understood monetary/fiscal policy provide. With a proper understanding, the debate could have focused on real issues instead of bogus ones. That never happened.

    The debate over health care in the US was driven by cost considerations and the president and his party tied their hands by declaring from the outset that the solution would have to be deficit-neutral. As a result the emphasis was on cost-cutting, rather than promoting the general welfare or accomplishing public purpose. Obama’s starting point for negotiating was woefully inadequate, but it was apparently the best he thought he could get, considering the weight of conservatives in his own party. Most pundits in the US are not amazed that he was able to prevail, when a few weeks ago it seemed that health care reform was dead and that the GOP had beaten him to his knees, as they had so boldly and brazenly planned to do. Yet, he managed to turn the tables on them in the end in a brilliant political endgame.

    Most of the issues the US faces are political in a courntry that is deeply divided. In the above comment, alientated had to label his satire a “joke,” because that is what is being posted in all seriousness on a lot of political blogs in the US. Twenty five to thirty percent of the country is cognitively dysfunction, judging from poll results, and another ten to fifteen percent is impaired. When you figure in the distribution of votes in the electoral college that elects the president and the inordinate influence of small population rural states, that’s dangerously close to the majority need to either take control of the govrnment or block change. It’s a wonder that anything gets done at all.

    In addition, there are many sociological conditions in the US that influence the system as a whole. For example, one of the problems affecting health care is the food industry. It’s so bad, I eat practically nothing offered in the supermarkets, where most people shop. It’s not food; it’s a poisonous mixture of salt, sweeteners, fat, and chemicals, the outcome of which is obseity, diabetes, hypertension, heart disease, and cancer. Moreover, the digital age has kids glued to their computers, TV’s, game machines, and digitial devices almost from birth. I have a friend with a young son not yet two whose favorite toy is a toy cell phone. No wondering where that is going.

    These are just a couple of problems out of many. The entire society is bascially dysfunctional based in no small measure on the present economic incentives and an educational system designed to serve commercial interests while promoting pursuit of self-interest and life as passive entertainment. As a consequence, many people are so uncritcal they have trouble following a debate of issues. They just want to know what’s in it for them. A good example is a recent poll of teabaggers. While they oppose government intervention on principle, 70% want the government to do something about jobs.

    While MMT would get the debate on the right track, there’s a whole lot more to it that is bitterly contentious thn fiscal policy. The US has a long way to go to straighten itself out. The imbalances are endemic and the whole society needs to be reorganized to remove them. Without ending legalized bribery by instituting campaign finance reform, lobbying, and the revolving door, real political change is not possible. But the problem resides in the national mindset, where progressives make up only 20% of the voting population, reactionaries about 40%, the center leans conservative, and the media is a propaganda machine contolled by the plutocratic oligarchy.

    The way I see it, Reagan-Thatcherism still has a way to run before its energy is exhausted, and it may take a depression to do it. The middle class in the US is just not hurting badly enough yet to be be able to get it. But without meaningful reform a bigger financial crisis is on the way. Not a pretty picture to contemplate.

    The one good thing that has emerged, and the president is rightly touting it as a great accomplishment, is that health care reform recognizes universal health care as a right and not a privilege. However, this bill only recognizes it as a right of citizenship and not a human right by excluding non-citizens. But some progress anyway. Otherwise it would be a bust – mostly a subsidy that is really an oligarch’s tax.

  3. The Health Care Law is certainly not ideal. It ensconces, but regulates, insurance companies with high overhead and non-productive bureaucracy in their roles as overlords of Health Care. But it does do some good.

    In human terms, it is undeniably a good thing that ~30 million more people will have Health Insurance. Although it is obviously true that insurance companies will create obstacles to turning that insurance into Health CARE, if people have insurance those obstacles are not insurmountable in the same way that not having insurance is an insurmountable obstacle blocking access to something like chemotherapy.

    Insurance companies are also required by law to spend 85% of their expenditures on actual Health Care, as opposed to administration. That is not nearly a high enough percentage, but it is something.

    It also moves away from the disastrous system of EMPLOYER provided Health Insurance, by creating the exchanges. Hopefully over time the exchanges will make up a much greater proportion of market share and Employer Provided Insurance will continue to wane.

    I agree with Tom Hickey – the one good thing is that by making Health Care universal or near universal, it (hopefully) changes the tenor of debate within the US. After about 10 years even the Republicans will be forced to operate on the assumption that everyone should have health care, and that the government has some sort of role in making sure that happens. That will blunt the force of cries of “socialism,” and “government takeover,” and “death panels” that we hear from the right.

    That is the optimistic take, anyway. The pessimistic take is that by applying a band-aid to the wound, it provides an excuse to ignore the underlying wound. And if there is one thing that the US Political system does well, it is ignoring problems.

  4. Bill: nice post. I think the concept of charging those who can afford to pay but who refuse to take minimal precautions to guard their health is an idea worth pursuing. Actually Marshall Auerback and I sort of touched on that when we argued it might make some sense to preserve a role for private insurance in the case of those who undertake risky behaviors. Our Policy Brief is at if any of your readers want our in-depth analysis of the problems with running healthcare through insurers. But preserving catastrophic coverage for risky behavior as a function of insurers might deal with your concerns. Like you, I oppose mandates so it will be a bit tricky. Randy

  5. In the U.S., we are suffering from incremental-itis whether health care reform or financial regulatory reform. What many people, particularly those who strongly supported this health care legislation, fail to realize is that incremental reforms only work if an incremental benefit is achieved or perceived. This legislation misses the boat, IMO. I hope I am wrong, because if I am correct any better reforms are dead.

  6. I agree that the health care bill was FAR from ideal. It made a couple small steps in the right direction regarding health care that have already been mentioned but I do think it made on possibly HUGE step. By turning back the GOP in their all out assault to stop Obama (even though this bill has GOP ideas all over it) and by NOT allowing the tea baggers to feel like they won a significant victory maybe Obama can embolden progressives and we can actually move forward on some other substantive issues like financial reform and job generation. A medicare for all type public option is not out of the realm of possibilities as an addendum to what has already been passed.

  7. i have had difficulty battling my weight all my life. at one point i had lost 117 pounds in less then six months. i am currently overweight. should i be denied health coverage or pay more because of a weight problem i developed before i can remember? people are different genetically and emotionally and to act like all those who are overweight or obese are irresponsible fatasses who just need to learn how to control themselves like normal people is callous and in my opinion wrong.

  8. Bill,
    While the U.S. system may have cost lives due to lack of access, how many lives have been extended or bettered due to the R&D and innovation from companies seeking profits that they may not get in a socialized system?
    I agree with Mosler’s approach of govt funded spending accounts. It follows MMT, eliminates all but catastrophic insurance, promotes healthier lifestyle and cost controls.
    Prof. Wray,
    Thanks for the link, It is my next read. And your book was my introduction to MMT several years ago. Thanks

  9. Dear markg

    Thanks for your comment. My understanding of the situation is that the US does not dominate the Health R&D scene although it is a big player. Europe which has tightly controlled health systems and a strong public component are also major players. Further, medical research capacity in Australia (predominantly public within universities) is first-class and among the world’s best.

    Just like the open source movement in software development has been much more creative and innovative than the proprietary developments (and it all for free) – I think top class medical research is similarly motivated by pride and dedication. Sure, profit drives the big companies but remember all of the advanced world other than the US has universal health care and that should tell you something. Unless the US was the healthiest nation with the most innovative health care arrangements (by a mile) then I don’t think your contention will hold.

    Warren’s proposal is pragmatic (for the US situation) and will deliver the benefits you note. But it still sees health care as a commodity that should deliver profits to a minority which is a philosophical position I do not share with him even though he is one of my best friends. I see health care as a basic human right and should be publicly-provided as a first-class not-for-profit service.

    best wishes

  10. Dear Nathan

    As I noted in the blog the issue is vexed and riddled with issues of who is responsible or not; thresholds of what we called responsible and reasonable; issues about nature and nurture; etc. The smoking issue is more clear in my mind than the weight issue. In the former case, I would definitely charge a health levy for smokers after the provision of public counselling services and support if they continued to smoke. Whether it is via private health insurance (as Randy hinted) or through the tax system (my preference) is an issue of policy design.

    In the “overweight” case I am less clear. It is clear that children who are overweight have a lot of problems later on losing it because of the multiplication of fat cells that occurs in their cases. Their parents are responsible. What do you do when the children become overweight adults and carry the emotional issues attached? I don’t know that answer.

    I would start my health policy in this sense by targeting the food production industry. The movie Food Inc is quite confronting in this regard and points one in the right direction as to necessary policy developments. Governments should take on the big corporations and increase food standards. Just like we tax cigarettes to discourage people from using them we should tax unhealthy food heavily to steer people away from it. The problem is that studies show that low income groups typically consume the worst food – highly processed and packaged – even though it is more expensive than fresh products prepared at home. So that is a vexed issue to work through.

    Given all this I mostly err on seeing this issue in terms of specifying an important role for the education system – to change the way people live and think about themselves and each other. I prefer that approach to the alternative of implementing a blanket system that punishes what we consider to be (and clearly is) dangerous health behaviour.

    And as I said in the blog – I would never deny a person access to first-class health care.

    best wishes

  11. Dear Bill,

    I agree with you that health care is a public right. In my analysis the argument goes as follows.

    A unit of occurence is a relationship of coincidences in a regime situation (i.e., environment) that form a domain set of phenomena, a group in relation to the unit that occurs (i.e., human specie). These coincidences/phenomena are in symbiosis among each other and this attaches common attributes/rights to each member in the group that displays a civic entity/identity. The domain subset of civic members (unit parts) with the common attributes/rights forms a community set with a publicity orientation. This is guided by the public incentive of duty/responsibility subject to the force of solidarity.

    Similarly, these coincidences/phenomena are in osmosis among each other and this attaches proprietary attributes/rights to each partner in the group that displays a shelf entity/identity. The domain subset of shelfish partners (unit parts) with the proprietary attributes/rights forms a market set with a privacy orientation. This is guided by the private incentive of interest subject to the force of competition. Notice that the two subsets form a joint domain set for the group whose boundaries are marked by the forces of symbiosis and osmosis.

    A privacy process orientation of the shelf unit part or market partner, utilizes and reasons for the proprietary attributes/rights of health and the provision/return of health service is guided by private interest subject to competition. This is a work/reward process offered by the medical profession in a market setting.

    A publicity process orientation of the civic unit part or community member, utilizes and reasons for the common attributes/rights of health and the provision/return of health service is guided by public duty subject to solidarity. This is a care donation/grace process granted by the public health agency in a community setting.

    Which of the two approaches is more appropriate? It depends on the relative orientation of the goup/society and if it considers health as a common civic right or a proprietary shelfish right. The ancient Greeks, founders of the western civilization, basing their view of humanity on common experience/knowledge (vioma) , they thought health and education as public goods, a culture to be shared and not traded.

  12. The sad thing is that this is yet another example of something that the vast majority of people want, but the political system fails to deliver.

    The national telephone survey, which was conducted from June 12 to 16, found that 72 percent of those questioned supported a government-administered insurance plan – something like Medicare for those under 65 – that would compete for customers with private insurers. Twenty percent said they were opposed.

    The reason is skillful triangulation, fear-mongering, and propaganda:

    Yet the survey also revealed considerable unease about the impact of heightened government involvement, on both the economy and the quality of the respondents’ own medical care. While 85 percent of respondents said the health care system needed to be fundamentally changed or completely rebuilt, 77 percent said they were very or somewhat satisfied with the quality of their own care.

    That paradox was skillfully exploited by opponents of the last failed attempt at overhauling the health system, during former President Bill Clinton’s first term.

    And this is the norm, rather than the exception. The U.S. system was designed from the start to resist public pressures and to favor the wealthy — one of the costs we bear for having a constitution written over 200 years ago, whereas younger nations all have more effective and responsive government. A guiding philosophy behind the constitution was to resist factions, via a process of divide and conquer — “multiply the factions” to make popular reform ineffectual. At the same time, the branches of government were split between legislators appointed by the wealthy (e.g. the Senate), and those elected by the public (the House), with the president elected by the wealthy (e.g. the electoral college).

    By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens…

    And Madison was more precise:

    The influence of factious leaders may kindle a flame within their particular States, but will be unable to spread a general conflagration through the other States. A religious sect may degenerate into a political faction in a part of the Confederacy; but the variety of sects dispersed over the entire face of it must secure the national councils against any danger from that source. A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State.

    Divide and conquer, confuse and multiply. And it’s amazing how little things have changed. Even though we elect both, nevertheless senators from conservative states with tiny populations are able to block legislation that the whole nation wants, and the money required to run for office effectively requires approval of the wealthy before a candidate is taken seriously. The “operational realities” have not changed materially since Madison’s day, and that’s why we don’t have healthcare, even though the population has overwhelmingly wanted it since Truman’s day.

  13. “bill says:
    Saturday, March 27, 2010 at 8:54
    Dear Nathan

    As I noted in the blog the issue is vexed and riddled with issues of who is responsible or not; thresholds of what we called responsible and reasonable; issues about nature and nurture; etc. The smoking issue is more clear in my mind than the weight issue. In the former case, I would definitely charge a health levy for smokers after the provision of public counselling services and support if they continued to smoke. Whether it is via private health insurance (as Randy hinted) or through the tax system (my preference) is an issue of policy design.

    In the “overweight” case I am less clear. It is clear that children who are overweight have a lot of problems later on losing it because of the multiplication of fat cells that occurs in their cases. Their parents are responsible. What do you do when the children become overweight adults and carry the emotional issues attached? I don’t know that answer.

    I would start my health policy in this sense by targeting the food production industry. The movie Food Inc is quite confronting in this regard and points one in the right direction as to necessary policy developments. Governments should take on the big corporations and increase food standards. Just like we tax cigarettes to discourage people from using them we should tax unhealthy food heavily to steer people away from it. The problem is that studies show that low income groups typically consume the worst food – highly processed and packaged – even though it is more expensive than fresh products prepared at home. So that is a vexed issue to work through.

    Given all this I mostly err on seeing this issue in terms of specifying an important role for the education system – to change the way people live and think about themselves and each other. I prefer that approach to the alternative of implementing a blanket system that punishes what we consider to be (and clearly is) dangerous health behaviour.

    And as I said in the blog – I would never deny a person access to first-class health care.

    best wishes

    fair enough bill. i also agree that the subsidies should be removed and unhealthy food should be taxed.

  14. one thing i’ve been wondering is do you think they’re should be subsidies for healthy foods to help encourage them in addition to subsidies? taxing unhealthy foods would discourage they’re consumption but without relatively cheap alternatives this could be very damaging to lower middle class and poor families (where the health epidemic is the worst).

  15. Please, let us remember how insurance operates – not in its “real terms of providing a “fund” to pay for costs but in its financial mechanism as a way to channel wages into the financial systems.

    Health care premiums have been rising significantly very recently in the US – some assume that real health care costs must be rising. No one asks the possibility that the portfolio loss of insurance carriers due to the crash could possibly be a factor, or that the private debt crisis could be affecting hospitals (huge indebtedness), physician groups, etc. Labor costs (doctors, nurses, support staff) is the largest component of health care provision – none of them are getting any pay increases – how can premiums go up 30% when over 50% of real spending is flat?

    As for the planned “reduction” in administrative expenses – debt service is not an administrative expense – although in the obscure accounting of US health care – where interconnected entities charge each other, so that one entities debt costs are another’s “administrative” costs, it won’t be hard to change the bookkeeping without making any real changes.

    The Obama’s health care “reform” is designed like Obama’s financial “reform” – you don’t even get lipstick on the pig, the government just forces you to f##k it.

  16. Bill.

    After reading your blog (which is awesome on economics), I did indeed get out my lefty flamethrower. Your later comment clarified what you were thinking enough so that I put it away, but I still feel the need to at least engage in some Queensberry rules. Let me give you some more cases to think about.

    – You give smoking as a (to you) straightforward case. People with schizophrenia and ADHD (and a host of other mental health issues) are known to have vastly higher rates of substance abuse, which is clearly related to their medical condition. In the case of ADHD, attempting to treat the substance abuse is completely innefective unless the ADHD can be successfully treated first. Does this ‘let them off’ responsibility for smoking? To generalise the point, if genetic and psychiatric research showed clearly that some people were more susceptible than others to addiction (which I believe it does), should we have a ‘sliding scale’ of responsibility, to reflect the greater or lesser degree to which smoking is a ‘free choice’ for different people?

    – People who lead healthy lifestyles can in fact incur far higher social costs through longer lives post-retirement, both in pensions and health care. Should they be penalised?

    – A couple chooses to have a child. Genetic testing of the couple reveals their children are likely to have far higher than average lifetime healthcare costs (think autism). Should the couple be penalised?

    I don’t think the issues of responsibility and rights are vexed, I think they are essentially irresolveable. Any agreement would end up being political in nature – how would you feel about denying health care to Aboriginals who choose to live on outstations? It’s hard to think of a clearer case of a lifestyle choice that leads to poorer health outcomes, and I hate to think how well it would poll in certain marginal electorates.

    Better by far to just say ‘All Australians have a right to the following list of health care services’ and choose a list whose total cost is what we as a society are willing to pay. The reciprocal responsibility is to work if you are able and obey the law (and pay taxes, serve on juries, attend elections etc). If you want to criminalise or tax behaviour (like smoking or being Aboriginal) then do so, but do it up front. Don’t try and ‘wedge’ it into health care, where it just doesn’t fit.

    Personally, I think that if we had a nice simple list that gave estimated-national-cost and estimated-benefit (in life-years and improved-quality-of-life) for all the proposed services, we would have little trouble politically or morally choosing a set that gave far better outcomes for much less than we pay now, and the whole question of health care would go away. Heart transplants cost a hundred thousand dollars for each year of life saved? Dump them. Community nursing costs 100 dollars per year gained? Bring it on! Rich people can buy the unprovided services privately (like they always could – until the revolution Comrade.)


  17. Dear begruntled

    I am glad you left the flame thrower in the shed.

    All the points you make are valid and excellent. Vexed to me is irresolvable to you.

    On the smoking question – clearly where are person can demonstrate (or someone else can on their behalf) the sort of reduction in volition that your examples demonstrate then there is no responsibility.

    But I don’t want to turn my blog into a soapbox for me to air my personal views on these matters which are tangential to the main purpose of my writing.

    best wishes

  18. Bill,

    The Neo-liberals assume that unemployment is voluntary without any hard evidence.

    Can you prove that the choice to smoke is voluntary rather than an involuntary act beyond the control of the individual ?

    Why I ask is that it would appear that smoking rates are highest amoung the unemployed and I wondered if indeed you have joined the neo-liberal camp in gaining pleasure from laying the boot into those less fortunate ?


  19. Dear Alan

    I can’t prove anything about anything. How would you know the truth even if you stumbled on it?

    Accusing me of being neo-liberal is a very shallow interpretation of the issue I raised.

    best wishes

  20. This is mostly a response to Tom Hickey’s post about the need for campaign finance reform and it being a prerequisite for the improvement of the system.

    The problems with our political system are extremely entrenched and it cannot be fixed through a single sweeping reform, even if we were to magically institute fully funded public elections and instant runoff voting. I agree that these are good reforms. We could even create a fully electronic voting system with PGP encoded voting receipts that allow each voter to know how their vote was recorded, based on an open source platform whose source code is public record. But we don’t do this, even though it makes perfect sense and there is no downside. If what Tom has said about the root of our problems (money in politics and cost of campaigns due to media access limits) and opportunity to effect good public policy (no opportunity in the status quo due to the corrupting effects he outlined) is true, then the reforms to our public election system and campaigning would also be impossible. In fact, common sense would indicate that these type of reforms are the least likely to occur, because every lobbyist in Washington is united in brotherhood when it comes to the issue of whether or not there should be lobbyists.

    Democrats fundamentally suffer from a lack of creativity. Democratic politicians are very similar to (and many start out as) school teachers or community college professors. This group is not known for coming up with original ideas and are always too afraid to present original ideas for fear of being wrong/crazy. Thus, the legislation that they eventually create is usually very tame, and based on conventional wisdom. Usually, the politician has no intimate knowledge of their own legislation, having read little more than the insincere political rhetoric that their staffers develop for the purpose of selling the legislation. Nothing more is required of them, in any event, as they are participating in the “permanent campaign”. As a result of this deficit, their public agenda is controlled by lobby groups.

    Universal healthcare in the United States was marketed by a progressive minority of Democrats in coalition with fringe liberal groups. The term they chose for it was “Single Payer”. The typical Democrat who was exposed to single payer typically heard or read many points about the merits of this “Single Payer” system before ever hearing what “Single Payer” meant. The term used for this method of coalition building is “dog whistle” politics. The idea was to organize progressives and liberals while staying off the radar of the mainstream. In any event, whoever thought up that term seems to have deliberately picked a phrase that evokes a 0/10 on the emotional response meter. Compare that to recent efforts to institute a national sales tax in the United States: Some versions of that tax call it the “consumption tax”. Others call it the “fair tax”. Regardless of the fact that we don’t have a national sales tax yet (though some Dems have proposed it now), much better branding has occurred.

    What I sense in America is that there is a schism, with academics on one side, who usually have very good things to say regarding public policy, and Democratic politicians on the other. Only a few academics seem to effectively bridge this gap, and unfortunately their ideas are not often consistent with the academic consensus on a topic or sufficiently tuned to the nuances of real-world economic, social, and bureaucratic systems. Although, as an aside, my school’s economic program was trash. One professor argued that women in developed countries have fewer children not because of access to birth control or womens’ liberation but because children are more expensive here. At that point my economic beliefs became rather cynical and I decided that the entire discipline grew out of a conservative reaction to certain aspects of enlightenment thinking, so sadly I wouldn’t welcome most economists’ advice in a real-world political discussion.

    The key, in my opinion, to bringing about better informed legislation is to pick better democratic candidates. That means that at the local level, the process of candidate selection for the very first political offices – the bottom of the ladder – needs to be improved. Campaign finance reform is great, but unless you want to see a faux campaign finance reform that accomplishes nothing at a great cost of political capital, it is probably, in a strategic sense not the best first target. But nothing is stopping college professors from registering with their county party and becoming more active in local politics.

    And for god’s sake, we need to improve internet access. If our currency issuing methods are draconian relics of feudal days, what can we say about the IP address structure of the internet, which for some reason was sold like real estate to various corporations, artificially creating a “limited supply” of what is nothing more than a logical address block, a thing that has no natural supply constraints (much like money)?

    Things have gotten pretty messed up in this country. There are many, many low hanging fruit. Those who are well informed should ask their Democratic Representatives (and Senators), some tough questions from time to time.

  21. Health care in Australia is not free to all….women with breast cancer pay $8000 for radiology treatment upfront and get a $6000 medicare return. Because they don’t always have the $8000 upfront…some opt for a masectomy instead. These women do not qualify for bulk-billing. So do you have $8000 spare in your bank account for when you get sick? Getting cancer in your lifetime is a one in seven chance. Quick treatment is essential if you want to improve your chances of having more birthdays to come.

    There are also long waiting lists for medical treatment and 8 hour to 12 hour waits for hospital beds. Free dental treatment exists only for school children. The reality of that, is a lot of people opting for a set of false teeth when the dental bill is too high for them to pay for….false teeth are subsidised (partial, for pensioners, base model…replaced every five years or something…only because it upsetting when people walk around without teeth….which is what they used to do when they couldn’t afford dentures or had ill-fitting dentures that didn’t let them chew anyway).

    Better than nothing. Agreed. But don’t kid yourself….we have people dying because they can’t get medical treatment here too. And there is a strong link between a lack of dental care and heart disease.

    And then there is the medicare levy….if you have an income over about $70 000? you need to pay about $1200? for medical insurance or pay that amount in tax. Consider it a fine….because if you pay medical insurance you’ll get some help with paying some of your medical bills (its the bottom level of coverage). But of course, medical insurance is not forced on you. And you can opt to give it to the government…who may or may not spend it on health care.

    However, I’m glad I don’t live in a world where I take vitamin tablets in lieu of a doctor’s appointment I cannot afford. Oh wait a sec……that will cost me $65 for a 15 minute consult plus medication costs…with a $26 medicare refund. Total cost is usually $90.

    If you work you can afford it….these women can’t find $8000 and every minute they wait reduces the chance of their next birthday. And how long did they mull over whether they were feeling sick enough for their first $90 doctor visit to get the cancer verdict in the first place? It will take two visits for inflammatory breast cancer….they usually diagnose it as mastitis first.

    Americans do know about our universal health care and limited insurance coverage…..those that have health coverage don’t want to wait 8 hours to get a hospital bed. Those that don’t have health coverage don’t seem to get as much internet space.

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