Perspective from Anne Case, Angus Deaton and Robert Putnam

January 8, 2020

Topics: Quote of the Day

By Heather Long
The Washington Post, January 7, 2020

America’s sky-high health-care costs are so far above what people pay in other countries that they are the equivalent of a hefty tax, Princeton University economists Anne Case and Angus Deaton say. They are surprised Americans aren’t revolting against these taxes.

“A few people are getting very rich at the expense of the rest of us,” Case said at a conference in San Diego on Saturday. The U.S. health-care system is “like a tribute to a foreign power, but we’re doing it to ourselves.”

The U.S. health-care system is the most expensive in the world, costing about $1 trillion more per year than the next-most-expensive system — Switzerland’s. That means U.S. households pay an extra $8,000 per year, compared with what Swiss families pay. Case and Deaton view this extra cost as a “poll tax,” meaning it is levied on every individual regardless of their ability to pay. (Most Americans think of a poll tax as money people once had to pay to register to vote, but “polle” was an archaic German word for “head.” The idea behind a poll tax is that it falls on every head.)

Despite paying $8,000 more a year than anyone else, American families do not have better health outcomes, the economists argue. Life expectancy in the United States is lower than in Europe.

“We can brag we have the most expensive health care. We can also now brag that it delivers the worst health of any rich country,” Case said.

Case and Deaton, a Nobel Prize winner in economics, made the critical remarks about U.S. health care during a talk at the American Economic Association’s annual meeting, where thousands of economists gather to discuss the health of the U.S. economy and their latest research on what’s working and what’s not.

As calls grow among the 2020 presidential candidates to overhaul America’s health-care system, Case and Deaton have been careful not to endorse a particular policy.

“It’s the waste that we would really like to see disappear,” Deaton said.

After looking at other health systems around the world that deliver better health outcomes, the academics say it’s clear that two things need to happen in the United States: Everyone needs to be in the health system (via insurance or a government-run system like Medicare-for-all), and there must be cost controls, including price caps on drugs and government decisions not to cover some procedures.

https://www.washingtonpost.com…

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Deaths of Despair and the Future of Capitalism

American Economic Association, Annual Meeting, January 3-5, 2020

Selected quotes from slides:

Anne Case

It is not inequality per se, but that the US system is grossly unfair

Unfair process generates despair for some, and huge rents for others, generating inequality

Roots of despair: Labor market decline for workers without a bachelor’s degree; Effects of which have been magnified through lass of community, marriage, meaning, status

Things that held life together and gave life meaning have badly eroded: Attachment to the labor market; A job with prospects; Marriage; Attachment to one’s children; Church affiliation; Community

Why has the decline of working class jobs hit the US so hard? Start from the most extreme: opioids; Move on to less extreme, but still bad, healthcare industry; Corporate behavior more generally; Upward (unfair) redistribution from poorer to richer

Destruction of white working class: Transfer of power from labor to capital; Labor weakened by decline of unions, globalization and automation; Instead of cushioning the impact, as was done in Europe, politics and corporations worked together to take advantage of labor; None more so than in healthcare industry

American Healthcare Industry: Healthcare is most expensive in the world, while delivering the worst health in rich world; While American healthcare is not so good at promoting health, it is very good at promoting financial well being of providers; Life expectancy is now falling, while money is redistributed upwards; Government, instead of stopping this, licenses the upward redistribution of income; Perfect example of how rent-seeking generates inequality: Enriching a few; At the expense of the many; jobs contracted out, wages held down, states forced to cut education and infrastructure budgets to pay their share of Medicaid; Family health insurance policy in 2018 cost $20,000: outsource for low skills; Profits and executive salaries in the health care sector soar

Multiple forces holding wages down for working class people: Loss of unions; Non-compete clauses; Many (most) people with employer provided health insurance don’t understand that health insurance is invisibly coming out of their wages – really messes up labor markets; Businesses contracting out lower skilled jobs in part to avoid paying for health care (no hope of climbing the ladder through hard work); Globalization and technical change are happening in all wealthy countries, but policy choices distribute gains differently

What is to be done? Different kinds of education? Rein in the cost of the health care industry? Find a way for labor to regain a voice at the table while the pie is being cut?

Robert Putnam

America today has reached historic levels of: Economic inequality; Political polarization; Social isolation; Cultural individualism

Conclusions: Today’s problems, including deaths of despair, are part of a longer, wider syndrome – a shift from an I-society to a we-society and back to an I-society; no simple causal story; Since problems are braided together, policy solutions to any single problem without addressing others may be unstable – for example, Obamacare; Americans faced the same interconnected challenges in the Gilded Age/Progressive Era, therefore seeks lessons from that UPSWING (How America came together a century ago and how WE can do it again)

Angus Deaton

Health care is so different here from what it is elsewhere. The Swiss (system) is the second most expensive in the world. They consume 12 percent of GDP. That 6 percent of GDP, which is the difference (from our 18 percent), actually matches quite well our estimates of waste. Six percent waste in health care is 50 percent more than we spend on our entire military. We were very careful not to endorse any one of the plans that are being debated, especially on the Democratic side, and partly because they’re talking about the wrong thing. They’re talking about coverage, and for the left in America, the lack of coverage has always been a problem. Obamacare did quite a lot about coverage, but it did nothing at all about costs. It’s costs that are killing us, not the lack of coverage.

Video with slides:
https://www.aeaweb.org…

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Comment:

By Don McCanne, M.D.

It seems obvious that with our great wealth and high spending on health care we should be able to distribute health care equitably so that we all get the health care that we need. But as Anne Case, Angus Deaton and Robert Putnam show us, health care injustice is just one problem in a background of fundamental societal flaws that were predominant in the Gilded Age, diminished in the post World War II era, and have returned with a vengeance. Major features include income and wealth inequality with a rise and decline in simple fairness, the decline and then rise in political polarization, the problem of social isolation (Bowling Alone), and the I-society of the Gilded Age (I, me, mine) shifting to the WE-society mid-century (we, us, our), and now back to the I-society.

Admittedly, it is difficult to reform health care financing without considering other reforms that will promote the upswing that we need. Though Deaton and Case do not endorse a particular model of health financing reform, they do note that the system must be both universal and costs must be controlled. Putnam notes that America needs to come together as a WE-society.

Of course, the single payer model of an improved Medicare for All does this more effectively, considering the upswing that we need. As an egalitarian system it would help promote the WE-society. Funding the system through progressive taxes would reduce economic inequality. With broad support amongst society, political polarization would diminish. With the nation joining together, social isolation would also diminish. And as far as reducing waste in the system, the greatest impact that we could have would be through recovering the $600 billion per year that is wasted on administrative excesses, a far greater amount than could be recovered through any other efficiencies, though other beneficial changes certainly would be welcome as well.

Let’s recover that $600,000,000,000 in administrative waste and use it to make health care accessible and affordable for all of us.

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