Krugman on Health Care

Krugman on Health Care

Paul Krugman has an interesting idea. Private health insurers can increase profits if they can select those people who are least likely to need their services. However, since we have a safety net in this country, those people end up getting taxpayer-provided health care.

According to the health organization, the higher costs of private insurers are 'mainly due to the extensive bureaucracy required to assess risk, rate premiums, design benefit packages and review, pay or refuse claims.' Public insurance plans have far less bureaucracy because they don't try to screen out high-risk clients or charge them higher fees.
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Isn't competition supposed to make the private sector more efficient than the public sector? Well, as the World Health Organization put it in a discussion of Western Europe, private insurers generally don't compete by delivering care at lower cost. Instead, they 'compete on the basis of risk selection' - that is, by turning away people who are likely to have high medical bills and by refusing or delaying any payment they can.