A Response to Mankiw

I first must poke fun at myself just a bit. I have not had any good critical comments on this site lately, and I guess I am missing the thrill of a good debate. So I have created for myself somewhat of a false debate here. Yes, I’m inventing an adversary, and I have chosen for myself a well-recognized, distinguished Harvard economist. I’m a bit out-gunned, but lucky for me he probably won’t respond.

So let’s get down to it…

Mankiw’s first statement regarding infant mortality and life expectancy is a valid one up to a point. The U.S. has a high homicide rate, and I (and you) will just have to trust him on the life expectancy thing (but I would like to see more of the research as I would have guessed that homicide and accidents could only account for a portion of the life expectancy discrepancy). The infant mortality rate is a troubling measure, but a good one as well. It is troubling for reasons that he mentions, but it is a good measure because this one measure captures many qualities of a health care system. It speaks to prenatal care (my guess is that Canada does this better), nursing, technology usage, doctors’ expertise, etc. So his point about high teenage pregnancy rates is true, but it is also true that the U.S. could improve our infant mortality rate numbers by providing universal prenatal care without obstacles. Canada does that.

His second statement was that the often quoted 47 million uninsured number over exaggerates the problem. I would say that it probably does, but not to the extent that Mankiw claims. Looking at the inverse numbers that Mankiw refers to, the U.S. Census Bureau states that there are over 33 million U.S. citizens without health insurance. And the percent of U.S citizens without health insurance grew from 12.8% in 2005 to 13.2% in 2006. So baseline-we have a problem and it is growing.

Second, of the 10 million that are not U.S. citizens the U.S. Census Bureau does not distinguish between legal and illegal. Legality is a big difference to many, but further, Mankiw assumes that illegal immigrants should not have health insurance of any form. That is a different policy debate, but it should not be assumed that we as a country are not better off by not providing care for illegal immigrants.

Third, he argues that 18 million (closer to 16 million actually) of the uninsured have household incomes over $50,000 so they of course can afford insurance. Well, let’s do some math. Let’s say a family of three makes just over $50,000/year (well, be generous – no tax burden). They spend $12,000 on housing leaving them with $38,000. A family policy in NY State in the individual market can run up to and over $24,000 (Aetna Health – $2,444/month in August 2007). So they have $14,000 left for everything else. Is that affordable?

Lastly, just because someone could have insurance and does not for whatever reason, does not mean that there are no longer negative effects on society as a whole. So if a person qualifies for Medicaid but is not enrolled that decision will still have negative consequences on society. Or if a person is young and chooses that the costs outweigh the benefit that decision will still have negative consequences for society. Or if an illegal immigrant cannot get health care it will still have negative effects on society. We cannot ignore the negative consequences to society as a whole from having 47 million people uninsured.

Mankiw’s third argument about the rising health care costs not really being a problem has validity, but he misses a huge point. Yes, we have wealth and we have tremendous health care technology advances that drive health care costs upward and upward. Spending more and more money on health care is not by itself the problem – “it is a symptom of success.” The problem is if you want to insure the 47 million uninsured (and growing). The rising health costs now present a formidable challenge. It takes over $6,000 to provide health care to each person. The more costs go up the more redistribution of wealth is needed, and the more politically unrealistic universal health care becomes. So if we as a nation are fine with a large number of people being without health insurance then the growing costs are not actually a problem, but when your employer drops your coverage then you will see a problem.

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5 responses to “A Response to Mankiw

  1. Like the new look! Did your wife have anything to do with it?

    As I read the op-ed, I had some questions and doubts. Thanks for clarifying those doubts into clearer responses.

  2. Hi, Lucas. My apologies for neglecting my critic duties (or maybe I flatter myself too much and you were actually thinking of MY comments when you said you “hadn’t had any good critics comment on this site lately”!). In any case, here’s a few comments from another point of view.

    First, regarding your site’s new format, it’s very cool-looking…and also very hard to read (white print on black). I’d suggest that you might re-assess the primary focus of your site to determine whether function really should follow form rather than vice versa.

    Next, regarding your critique of Mankiw’s numerical analysis, I must restate my problem with the 47 million number. It’s constantly bandied about by every proponent of universal health care, primarily to convince people of the HUGE number of Americans (residents, as Mankiw and I have stated) who are without insurance. But it truly is a dishonest number because most citizens and legal residents really would object to including those who are here illegally. And most really would object to including those who simply failed to enroll in insurance programs for which they’re entitled And most really would object to including those who could, in fact, afford insurance but chose to buy something else instead. My point is that 47 million is UHC hyperbole and despite my herein stated support for UHC, I object to its use in this (and other) discussions. The last issue of the AARP newsletter contained no fewer that 14 references to 47 million…I mean, REALLY!

    And if you focus on health care affordability as the major obstacle to expansion of the population of insureds, I’d like to re-focus the discussion on something that could be perceived as a more politically and socially acceptable redistribution of wealth. Specifically, if we were able to legislate that insurers must establish premiums based on the health management practices of their insureds, we might be able to a) motivate healthier practices, thereby reducing health care costs, b) inject more fairness into the system (hey, why are non-smokers carrying the burden imposed by smokers???) and c) create a monetary incentive among health-conscious individuals to support a mandatory insurance program so that they wouldn’t be stuck with paying the bills for the uninsureds.

    Here in California, a ballot proposition was passed several years ago that mandated that tickets and chargeable accidents must be the primary determinants in setting insurance rates. Contrary to what you might think, these two factors are NOT the primary criteria used in most other states, principally because insurance companies have found that garage location (where the insured lives) typically is a more reliable predictor of losses. And while the impact of this change has injected some inherent unfairness, it has had a tangible effect on peoples’ safety consciousness. As someone with a chronic lead foot (a condition that my doctor has been unable to effectively treat), I find that I am SIGNIFICANTLY more conscious of the speed limit knowing that my insurance rates might triple in response to another speeding ticket.

    Bob

  3. Bob,

    It’s good to hear from you. I agree that the 47 million number is not fully honest, but the 33 million U.S. citizens without health insurance is still a problem. And yes, some people who are uninsured could afford it, but that does not diminish the fact that they are uninsured. Granted they don’t deserve our sympathy, but the fact that they do not have insurance effects both you and me. The young and healthy by staying out of the insurance pools raises prices for everyone else. Delaying care has the potential to increase prices for us later. I think you get the point. 47 million people might not deserve our sympathy, but 47 million people using health care who are not paying into the system is a problem. In that sense the 47 million figure is a real number and a problem. No there are not 47 million people who have heart tugging desperate stories, but there are 47 million people living in this country who are not in the insurance system.

    Here’s an analogy: Would you think it was a problem if 47 million drivers did not have car insurance? They don’t deserve sympathy, but it still is a huge problem. In that sense the 47 million number is not a bad number to use. For sympathy somewhere around 33 million may be a bit more accurate.

  4. Lucas, maybe what we need is a two-pronged approach to selling the populace on UHC. For the compassionate, we can pull out the heart-rending stories and use the “47 million uninsured” number. And for the selfish and hard-hearted (yes, I’ll include myself in this group), we can quantify the burden that those without insurance are placing on everyone else. This is a number I have yet to hear anyone cite and it’s critically important. For instance, if this number were $33 billion/year ($1,000/uninsured) and the cost of providing UHC was $50 billion/year, then the NET cost would only be $27 billion, perhaps still a big number but WAY less than the gross number. And that’s the cost that should be quoted when we discuss how much UHC would cost.

    After submitting my post last night, I watched the CBS Evening News (TiVo’d) and saw an interesting piece on employers using monetary incentives to encourage healthy lifestyles, something that 46% of large companies now do. It supported my contention that there’s a huge opportunity to reduce health care costs by putting the responsibility on individuals, which I feel is where cost reduction should start. Here’s a link: http://www.cbsnews.com/stories/2007/11/06/eveningnews/main3461782.shtml

    Lastly, here’s another wild idea I had that could reduce the cost of offering insurance to those who cannot afford it. Pass a law which states that anyone receiving government-paid medical insurance (not including Medicare, which ostensibly is paid for by workers and employers) would be barred from filing malpractice claims. This would enable the government to the deduct cost of malpractice insurance from fees charged by doctors and hospitals, since they in turn could reduce their premiums based on the reduced risk to which they would be exposed by such patients. Yep, the compassionate would yell about a loss of protection for the poor but wouldn’t insurance coverage for these folks be worth that loss?

    Bob

  5. Oops…better put new batteries in my calculator. In the example I quoted for the net cost of UHC, it should have been $17 billion ($50 billion minus $33 billion), not $27 billion. As Everett Dirksen said, “A billion here, a billion there, and pretty soon you’re talking real money.”

    Bob

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