Krugman Interview: Social Security and Healthcare Thoughts from Krugman

by Mary

[Part III of my interview with Paul Krugman. Previous posts: part I and part II]

There were two questions that people had asked me to ask you about, which I think relate to the possibilities for the future if our country was in a more normal state. Is there a way to create a sustainable system for social security and Medicare, perhaps providing universal healthcare that our country could actually support for the long term?
Well, the important thing to know is that there are two issues here that are really quite separate. One of them is social security which is primarily a retirement program and also a disability program which people overlook. That is not a serious problem.

If you actually do the arithmetic, particularly if you use economic assumptions that are comparable to those used in other forecasts, (the social security administration uses figures that lowball the growth), that program really has some pretty minor problems. It's good for another forty years without any problems, and with modest changes you would push that out so far in the future that I don't think it isn't worth even thinking about. For all we know, robots will be doing all the work by the time it really becomes an issue.

So, social security is not a big problem. In whole, the demographics issue is important, but not crushing. If the only thing that was going to be happening to the United States was that we were going to get older, then what you'd be seeing is that over the next 40 years or so, federal spending would have to rise by about 15%. And given that we don't have particularly high taxes compared to our own past and to other countries, this doesn't seem to be much of a problem.

The other issue is healthcare. It's not just Medicare, in fact, it's a broad problem. The reason it's thought of as a Medicare problem is because we do have national healthcare insurance for seniors. We don't have it for everyone else, but we probably should. So we have problem that manifests itself in different ways for everybody else. We have a problem in which the costs of Medicare are rising and in which health insurance is becoming harder and harder for working people to get.

There is a deep philosophical problem which I don't really know the answer to, which is if past trends continue, then medicine can do more and more stuff at greater and greater expense. And then [it becomes a] question of how do we ration access, because we can't pay for everything which can possibly be done. And that is going to be a very hard issue 50 years from now.

If you want the academic sort of, what if, then suppose there is a treatment that for 10 million dollars can make you live for 500 years? Who gets that? Do we actually say that the wealth can buy immortality? That produces a society of catastrophic inequality. [So], how do we handle that?

But short of that, what we have now in the US system is extremely bad value for money. We have an awkward mix of private and public systems which is extremely wasteful. Basically the private health insurer spends large amounts of money trying not to cover people. As a result, we have very high overhead costs compared with anyone else. And we have a huge amount of private plans trying to shuffle people on to public aid and trying to shuffle them off to who knows where. The end result of all that is that we spend far more on healthcare than any other advanced country and we get far less than any other advanced country.

The straightforward answer is some form of consolidation. I've actually had conversations with healthcare economists, good ones, and I said all your arguments seem to be pointing toward a single payer system like Canada. They've told me politically that it's just not possible, that the interest groups are too strong so we have to look for incremental changes. Which is a terrible commentary, but I guess if that is the way it's going to be, then you look for things that push things in that direction.

The Kerry healthplan has a bunch of pretty conventional stuff which is all good, but not particularly very different. It proposes basically to extend Medicaid into the working class, which is certainly something we should do. But it does have one very smart idea, which is to have this single payer coverage not for everything, but for catastrophic health costs.

That's a very good idea and something that is a win-win solution for just about everybody. It means that insurance companies are not going to be quite so desperate to find high risk patients and knock them off the books. Which means a lot of wasted effort goes away and it means that there is a lot more comfort and assurance for people involved. It's possible that policies along this line can get you most of the benefits of the single payer solution while preserving a lot of the private sector business which makes the whole thing politically a lot more palatable.

It seems to me that businesses are demonstrating that they are increasingly unwilling to hold this responsibility.
Yes, in fact, there was a story a while back where the big three automakers went to the Canadian government to express alarm that there might be any compromise to the Canadian single payer system because they don't think this would be very good for business. They don't say this south of the border, but in Canada, it is clear that it's good for business as well as for ordinary people to have a national healthcare system.

It levels the playing field and it reduces the incremental cost of hiring someone new.
Yes, and the point is if we think it is wrong for people to be without health insurance, and really we clearly do think that because that is a widely held social value, then making it part of the incremental cost of business -- adding to the marginal cost of labor by making it part of what business have to do is a mistake. In fact, we have this system that works with a weird combination of taxes and moral suasion to cover most people and that system is cracking. It really is time to do something about it.

I know that the Blue Shield president here in California has called for a single payer system.
Yes, it's one of those really quite straightforward things. You could say that the very best care in Canada is not as good as the very best in the United States, but the best is not necessarily what's given, and we can do better than that. And the average quality is a lot better.

Tomorrow: Outsourcing and conclusion.