Nobel Economist: What It Will Take to Fix U.S. Healthcare

“America’s private health insurance system is far more costly with far poorer results than the public option programs in Europe.” So writes Nobel-prize-winning economist Joseph Stiglitz in his new book.  His solution to fix healthcare:  “people power.”

His conclusion lines up with Fixing U.S. Healthcare blog. He agrees that the healthcare system needs more than the simple Oregon-style cost-benefit technical tweak originally pitched by this blog.

But, in contrast to this blog, he answers the question of whether a public option – not full-blown single-payer – will have sufficient clout to tame healthcare costs:  Maybe. This question was posed in an earlier post.

Instead, Stiglitz claims that the public option could suffice to control costs if it is backed up with grassroots collective action – “large numbers of truly engaged individuals, in movements . . . working in concert with each other.”  (People, Power and Profits, p. 178) Stiglitz agrees with this blog’s more recent message that “government is one of the most important ways we can work together.” (Ibid.,p. 155)  But he also sees a role for the private sector, non-profit organizations, volunteer civic associations, and unions.

Stiglitz sees healthcare as but one aspect of a broader decay in the U.S. economy. Excessive concentration of wealth and power has diverted the whole economy from its prime purpose of affording Americans a decent life.   And this concentrated economic power has in turn distorted politics and our entire social fabric.  Stiglitz criticizes business activity that just seeks to slice off ever-larger shares of the economic pie for the few rather than growing the whole pie to be shared by all.

Politics can’t fix itself. Without a political fix, the broader economy can’t fix itself. And so healthcare can’t fix itself, either.  Stiglitz lays out a set of multi-pronged reforms needed to fix them all: campaign finance, Supreme Court and judiciary, labor market policies, industrial policies, fiscal policies, to name a few. He calls for investment in infrastructure, research, and education, all keys for keeping the U.S. competitive in a post-industrial globalized world economy.

Points of Agreement

Here are a few excerpts from Stiglitz’ book that align with this blog:

• “I … [distinguish] wealth creation from wealth extraction… The true source of ‘the wealth of nations’ lies in the former, in the creativity and productivity of the nation’s people and their productive interactions with each other. It rests on the advances in science, which teach us how we can discover the hidden truths of nature and use them to advance technology. Further it rests on advances in understanding of social organization, discovered through reasoned discourse, leading to institutions such as those broadly referred to as the ‘rule of law, systems of checks and balance, and due process’… If we truly understand the sources of the wealth of the nation, we can achieve a more dynamic economy with greater shared prosperity. This will require government to take a different, probably greater role than it does today.” (Ibid., p. xiv) See: “Taming the Healthcare Tapeworm”
• “Markets on their own will fail to achieve shared and sustainable prosperity. Markets play an invaluable role in any well-functioning economy and yet they often fail to produce fair and efficient outcomes, producing too much of some things (pollution) and too little of others (basic research)… If there are large discrepancies between the social returns of an activity – the benefit to society – and the private returns to the same activity – the benefit to an individual or company – markets alone will not do the job… Nor do market work well when information is imperfect and some key markets are absent (for example, insuring important risks, like that of unemployment); or when competition is limited.” (Ibid., p. xxiii) See: “Why So Expensive?”; “So, You Want Competition to Bring Down Healthcare Costs?”; and “Healthcare Hits a Pothole.”
• “Capitalist economies have thus always involved a blend of private markets and government – the question is not markets or government, but how to combine the two to best advantage.” (Ibid., p. xxiii) See: “Applying Our Values & Philosophy to Healthcare Reform” and “ ‘ Single-payer healthcare is socialism!’ Why That’s Wrong and Wrongheaded.”
• “Markets don’t exist in a vacuum; they have to be structured, and the way we structure them affects both the distribution of market income and growth and efficiency.” (Ibid., p. xxv) See: “Taming the Healthcare Tapeworm”
• “The economic system toward which we have veered since the early 1970s – American-style capitalism – is shaping our individual and national identities in unfortunate ways. What is emerging is in conflict with our higher values – the greed, selfishness, moral turpitude, willingness to exploit others, and dishonesty… Norms, what we now view as acceptable behavior or not, have been changing in ways that undermine social cohesion, trust, and even economic performance.” (Ibid., p. xxvi) See: “Power, Politics and Philosophy” and “Healthcare Reform & Civility”
• “Finally, this is a time for major changes. Incrementalism – minor tweaks to our political and economic system – are inadequate to the tasks at hand… But none of these economic changes will be achievable without a strong democracy to offset the political power of concentrated wealth. Before economic reform there will have to be political reform.” (Ibid., p xxvii) See: “Needed: A New Idealism”; “Are Insurance Companies & Drug Companies the Culprits?”; and “Candidates Debate Healthcare Reform”

Points of (Slight) Disagreement Explained:  Is More Healthcare Necessarily Unsustainable?

Stiglitz supports a public healthcare insurance option alongside private commercial insurance, though he does not rule out a single payer system as such, a slight difference from this blog, as discussed above.

Stiglitz sees healthcare as a key component of quality-of-life. But he also sees it as good business, since it promotes worker health, wellbeing, and productivity. And it is a source of well-paying jobs in the post-industrial service economy.

Thus, he sees nothing inherently wrong with spending an increasing share of GDP on healthcare. This contradicts another of this blog’s messages, that spending ever more is unsustainable.

However, Stiglitz appears to me to give insufficient inattention to opportunity costs lost in both the private and public sectors when crowded out by healthcare spending. For example, to the argument that the U.S. cannot afford healthcare for all Americans, he points out that “the United States did a better job some sixty years ago. . . at the end of World War II, [when] we were much more indebted, and we were much poorer, with per capita income just a quarter of what it is today.” (Ibid., p. 210) He frames the challenge as mainly a political trade-off between the super-rich and the (dwindling) middle-class, not a budgetary matter of over-spending.

But he likely would get an argument from conservative economist Larry Summers. Summers argues that the U.S. national debt is not a crisis because fortunately global interest rates have been so low for the last decade. Accordingly, the actual dollar cost of interest on the national debt has been relatively low by historical standards. However, against the possibility that interest rates could rise in the future, Summers does caution not to irresponsibly further add to the debt. Thus he reminds us of the dismal science’s axiom that budget trade-offs are indeed necessary. Anything worth doing – like expanding healthcare access — should also be worth paying for.

So, Summers says there is no debt crisis (at least not yet).  And Stiglitz says our healthcare spending is not unsustainable. Spending ever more GDP on healthcare is not necessarily bad. Human services of all kinds will be a larger component of a post-industrial, information-driven, roboticized economy.

These two economists, then, reduce this blog down to the claim that ever-increasing healthcare spending is unwise only because it yields diminished marginal benefit  – we’re no longer getting our money’s worth. No crisis; not exactly unsustainable – just unwise and counterproductive (and unfair).

This blog claims that other spending on currently underfunded common goods would yield proportionately more value. Stiglitz does acknowledge that the U.S. is under-investing in education, research, infrastructure and other public policies. He believes that these short-sighted choices that enrich the few in the short term will undermine America’s economic preeminence in the long run.

Thus, I suspect that Stiglitz would see the apparent difference between him and this blog as a matter of emphasis and a difference of framing – political versus economic. I do not think he would disagree with this blog’s economic admonitions against paying excessive prices for costworthy care nor against paying ever more of the GDP on non-costworthy, wasteful care. I, for my part, do not disagree with Stiglitz’ political argument that America’s choice not to provide healthcare to nine percent of its citizens is both a social injustice as well as economic folly.

Meanwhile, Americans are no longer blissfully complacent about healthcare costs. According to a recent Gallup poll,  42 percent are dissatisfied with their own healthcare costs, and fully 80 percent are dissatisfied with overall national healthcare spending. If economists aren’t enough to motivate healthcare reform, American wallets are.

Now, take action.

Reference:

Stiglitz, Joseph, People, Power and Profits, New York: W.W. Norton & Co., 2019 (All quotes are taken from this book.)

Image Credit:

Title:  Joseph E. Stiglitz, PhD

By: Raimond Spekking

URL: https://commons.wikimedia.org/wiki/File:Empfang_Joseph_E._Stiglitz_im_Rathaus_K%C3%B6ln-1473.jpg