Monday, July 11, 2005

National Health Insurance and Health Care Costs

Nathan Newman, in noticing that Toyota has chosen Canada over the U.S. as a location for a new auto plant, argues that
providing national health care (like a strong education system) may emerge as one of the few legitimate subsidies governments can provide to encourage industry to locate in their countries. And the United States is increasingly finding itself in a terrible economic disadvantage internationally because it refuses to create a national health insurance system.

This is at best confused because, fundamentally, it doesn't matter who explicitely pays for health care, you eventually pay, whether in taxes or in direct fees. Health care policy is tax policy. A national health system that costs the same as what we have (a bit more than 14% of GDP) wouldn't a priori cost less for Toyota: depending on corporate tax policy, it may even cost more.

Now what you can say is that a national health system may well, over time, end up costing less because of lower administrative costs and etc. And thus, Toyota would pay less. But even there you don't know, because you could have a tax regime which falls heavily on corporations (highly unlikely...). Also, while other OECD countries spend far less as a share of GDP than the U.S., the first derivative of spending is about equal: health care expenditure is increasing at the same rate across all industrialized countries. True, in absolute terms spending in the U.S. is increasing faster, but the forces driving increasing health costs (technological innovation, which includes me-too drugs...) have an equal impact on national health systems and the U.S.'s system. So there is no real reason to believe that the growth path of health care expenditure would change under a national regime.

Keeping health care costs in check is far more complicated than simply changing the financing regime. It is false of Newman to claim that going to a national system would necessarily keep costs lower than they have been....Though note the use of the word necessary: it is probable that a national regime could, over some vast time frame, prove more economical.


Anonymous California Health Insurance said...

A national health insurance system can be great for the health system.

6:11 PM  
Anonymous Blue Cross of California said...

I think national health insurance can be a great product. Health care costs are generally rising and I would like to see them decrease.

9:45 PM  

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