David R. Henderson  

Krugman on Canadian Health Care

Health Insurance and Reputatio... Why Liberals Needn't Fear Repu...

"Bad move on my part"

In a September 2008 debate on health care, Paul Krugman asks a question of the audience and gets a surprising answer. I won't ruin the suspense. Just watch this 30-second segment. Given my experience with my Canadian father's health care, which I have written about in Making Great Decisions in Business and Life, and given the data on queues in Canada, which the Fraser Institute documents every year, I'm not surprised. Clearly Krugman was.

But here's what is most striking to me about the 30-second segment: what Krugman says when he finds evidence that contradicts his priors. Krugman says, "Bad move on my part." In other words, the conclusion he draws is that he made a strategic debating error in calling on the audience to evaluate the Canadian health care system. Now, he could have said that you can't tell much about the Canadian system by asking 7 people to evaluate it. But, of course, he was quite willing to use that evidence had it gone his way: otherwise, why ask the question? Not quite to the standard of his hero, John Maynard Keynes, of the "When the facts change, I change my mind" quote.

H/T to Jeff Hummel

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COMMENTS (22 to date)
Norman Maynard writes:

As shocked as I am to be defending Krugman, but I don't think characterizing him as failing to meet intellectual standards is accurate here. After all, If you were debating the general failings of socialized medicine based on father's Canadian experience, and a dozen Canadians in the audience pointed out that they love the Canadian health system, and have not had serious trouble with queues, would you change your mind? Or would you consider it a minor tactical error in a debate and move on?

My priors may be wrong, but I find the former highly unlikely.

David R. Henderson writes:

Dear Norman,

Good point, and it's one I already made in the post. The real question, and I made this point in the post, is how much weight you can put on opinions of 7 people whose experience you have no clue about. So if the opinions had gone the other way, would Krugman have said, "Don't put any weight on them?" I think you and I both know the answer. I made all these points in the post above.

Re my father. Very different story. What we came up against with his problem was the systematic nature of the single-payer system: preventing him from having surgery that they were virtually positive would fix the problem because his situation wasn't "serious" enough yet. Ditto with his glaucoma, a story I didn't tell in my book. Longer story that I'll tell some time.


David R. Henderson writes:

Dear Norman Maynard,
P.S. If you had asked my father, even during his time waiting to get sicker, which, fortunately, he did ("fortunately" because then he had a successful operation), what he thought of Medicare (Canada's name for its system), he would have said it's great because everyone is covered and it cost him nothing out of pocket. He was saying this even as I was making plans to fly to Winnipeg and drive him down to Fargo for his cataract surgery (I erred in calling it glaucoma above) and he was excited about getting the surgery.

greenish writes:

That's silly - if he were just playing the calculating debater with no regard for the truth he wouldn't have cut against himself by pointing out his own mistake. What matters, regarding his intellectual honesty, is what he does after the heat of the moment has died down.

RL writes:

Krugman believes (and I think has polling numbers to justify the belief) that a majority of Canadians like their socialized system. So he was playing the odds that the Canadians in the audience resembled the general Canadian public in that way. As a strategic gambit when another panelist said he thought the Canadian system was bad, Krugman tried polling the audience to show the majority disagreed. Didn't work. But all of this is strategic. Krugman wouldn't argue that his REASON for preferring a socialized system is that the public prefer it. Therefore, he doesn't have to revise his general beliefs based on the audience poll results.

The real (strategic) error might have been the other panelist's lack of followup. HE should have asked the Canadians in the audience if they'd had personal experience with the Canadian health system. IF they said yes, he could have pointed out to Krugman that the reason most polls show Canadians like the system is that most people don't use the health care system (most are healthy). When restricted, as perhaps in the audience, to those familiar with the system, the answer changes.

David R. Henderson writes:

RL said it well. The only thing I would add is that polling even people who've had experience with the system is inferior to asking them to describe their experiences with as much detail and accuracy as possible. In a poll, my father would have said that Medicare (Canada's version) was the greatest thing since sliced bread. But his own experience belied that.

Barkley Rosser writes:

I have ripped on Krugman on numerous occasions and indeed he looks pretty silly here. However, I have yet to see a comparison of polls that are remotely comparable that show Canadians less satisfied with their health care system than are Americans with theirs.

Of course, each system has its virtues compared to the other. So, if one is either quite well off financially or has a good insurance plan and has a non-fatal obscure illness, they will certainly be better off being in the US system, and there are certainly others for whom the same could be said.

Chandran writes:

Would it be fair to say that the US system has better health care and the Canadian (and British) systems better health coverage?

RL writes:

Chandran: "Would it be fair to say that the US system has better health care and the Canadian (and British) systems better health coverage?"

Yes, if you understand that COVERAGE does not mean access. Coverage merely means a piece of paper that claims you have a legitimate entitlement to access. If nonetheless the doctor can't see you for six months, you've got coverage but no access. Meanwhile, in the USA, even without coverage, you've got immediate access to any emergency department in the country (a legal entitlement per EMTALA regulations.)

Tom West writes:

General comparison studies of survival rates of the same disease between Canadian and American hospitals found no clear "winner". American hospitals had better survival rates on a slight majority of diseases measured, and the Canadian hospitals measuring a little better for the rest. Hospitals on both sides are, no surprise, analyzing the results to see what they can do to learn from each other.

It is absolutely true that you get what you pay for. Canada gets a Corolla style medical system for Corolla prices, and the USA gets a Lexus style system for Lexus prices (at least if you are insured).

Both more or less get you were you want to go, and do so at seemingly comparable rates. However, those who dream that you can get American style levels of service for Canadian style prices are dreaming in technicolor, as David Henderson's example points out. In the end, cheap health care means rationing.

However, providing American levels of medical care for *all* Canadians would mean a massive sacrifice of all other government services or unsustainable tax increases. We simply can't afford US levels of spending.

So, we have a system that we can afford, works *reasonably* well, and satisfies the (generally shared) Canadian moral value that, in the end, all lives should be considered equally valuable.

It does this at the cost of the (generally shared) American moral value of freedom for citizens to use their money in any way that doesn't directly harm others.

I see both medical systems as a reflection of the moral values the inhabitants of these countries find important.

Barkley Rosser writes:

Nobody should kid themselves. The US system rations, it just does it in a different way than the Canadian system.

Colin K writes:

@Barkley: The US system rations everything except opinions, the supply of which is unlimited and greatly exceeds demand.

Anyway, we all agree that certain resources (MRI machines, surgeons, cutting-edge pharmaceuticals) are scarce. So we need an allocation mechanism. I favor market-based pricing because I believe it does the most in the long run to increase consumer surpluses.

Today's best care is costly but patents expire and new techniques become old hat and become tomorrow's baseline. What we would call average care today is better in terms of outcomes than what a Rockefeller could have received 25 years ago, particularly when it comes to heart disease, cancer, and stroke. Though the Rockefellers would have enjoyed a very large room with lots of servants to ease them on their way.

I am more interested in improving the quality of care in the long run than in reducing its cost in the short. The UK and EU all have "better" healthcare financing systems than we do and yet their economies are less structurally sound than ours. "Solving" the healthcare problem seems to just free the beast to gobble up some other part of the economy.

Rick Weber writes:

"It is absolutely true that you get what you pay for. Canada gets a Corolla style medical system for Corolla prices, and the USA gets a Lexus style system for Lexus prices (at least if you are insured)." -- Tom West

http://www.bumrungrad.com/ No, THIS is a Lexus! American Hospitals look third world compared to the pictures I've seen of Thai Hospitals!

Thanks for sharing the link Professor Henderson! Finally Krugman gives me reason to laugh! It's been scary lately, especially after all the work my family went through to leave Canada! Where would I go if Obama got his way?!

Hume writes:


What is (are) the definitive free market health care book(s)? Thanks for any recommendations.

MHodak writes:

Thanks, Colin, for pointing out the trade-off that nearly everyone else misses--innovation. Every market faces four trade-offs:

- Availability
- Quality
- Cost
- Innovation (new developments that increase availability or quality, or reduce costs)

The definition of trade-offs is that in the short run, you can't get more of all four at the same time. All of the air in the current health care debate is taken up by availability (i.e., access) and cost. Quality is being argued to a lesser extent--many seem to believe that quality differences between health care systems are small.

Very few, however, and almost no-one in the public debate, seems to be asking who is going to develop the next generation of treatments when the U.S. market is no longer providing returns to innovators because our costs are now "under control." I know top managers in firms around the world that make drugs and health care devices. Without fail, all of them say that if the U.S. market looked like Europe's, Canada's or Japan's, they would simply cease to invest in new technology.

Without health care innovation, we would all have to recalibrate our expectations that the pace of new drugs and treatments we have experienced in the last several decades would continue. Unfortunately, the lack of cancer cures that we or our children should expect to be there when they need it is not a problem for current politicians promising that we can have both more access and reduced costs.

Max writes:

"Meanwhile, in the USA, even without coverage, you've got immediate access to any emergency department in the country (a legal entitlement per EMTALA regulations.)"

I doubt that is untrue in Canada or any other socialized health care system. In Germany or France, f.e., there is a law against denying emergency help at hospitals (that's the location most emergency cases wind-up). However, getting a regular appointment to your doctor or to a specialist is nearly impossible. Also, high-tech treatments like Laser-eye-surgery or plastic surgery are top notch in the US, but not in Germany, because they are expensive and doctors want to be paid a lot more (which is not possible in Germany)...

But I don't understand why one couldn't make a decent step in between both systems. Coverage for expensive treatments for everyone, but pay by visit for lesser treatmenst (cold etc.)
This would greatly reduce abuse of universal health coverage...

Colin K writes:

@Max: "But I don't understand why one couldn't make a decent step in between both systems. Coverage for expensive treatments for everyone, but pay by visit for lesser treatmenst (cold etc.)"

Universal national catastrophic coverage is initially appealing but I wonder if all government-built roads don't lead back to Canada in the end.

I would be very interested to see a breakdown of health expenditures by price, i.e., '25% of health spending goes to services costing $500 or less.' I've always heard that an outrageous amount gets spent on the last year of peoples' lives, for instance, when it would seem like you measure spending in multiples of $10,000.

Conversely, I have a chronic lifetime illness (hypothyroidism), treatment for which costs a whopping $20/month for some pills (retail price). The government could agree to cover me 100%, and if I lived well past my 70s, the all-in cost in today's dollars would not much exceed $10,000 for life. Likewise, the cost of an annual physical, hypertension and cholesterol meds, flu shots, and the occasional antibiotics and one-off visits could probably be covered for a couple thousand per year, maybe even less, which the federal budget could probably swallow without serious indigestion. Even more serious conditions (e.g. diabetes) don't necessarily rack up tons of out-of-pocket-size expenses, but go along costing manageable amounts until a complication occurs and you start needing heart surgery or dialysis.

Anyway, my point is that if most of the explosion in healthcare costs is happening because we're going from spending $5,000 on morphine while the patient dies to spending $150,000 to give them 5-10 years, then the difference between government-paid-everything care and government-paid catastrophic care will effectively become zero.

Barkley Rosser writes:

The gold standard for the world is probably the mixed system in France, at least that is what the WHO claimed a few years ago. That system was not set up overnight, but evolved over time. I can report that when I was living in France as a visitor with a small child, when the child was sick, a doctor came to visit us in our apartment, no waiting. I do not know if that happens in Canada, but it most certainly does not in the US.

Burke Almquist writes:

He was saying this even as I was making plans to fly to Winnipeg and drive him down to Fargo for his cataract surgery (I erred in calling it glaucoma above) and he was excited about getting the surgery.

I guess I don't know where you'd be flying from, but that seems like an incredible trip to take to get cataract surgery.

Taylor writes:

National polls have repeatedly shown that Canadians overwhelmingly support the single-payer system. Here's recent poll on primary health care in Canada:

Phil David writes:

Polls on health care are misleading. It really depends on how you ask the question and who you ask it to and what their background is.

Like David mentions above, his father thinks the canadian health care system is the best thing since sliced bread, but the quality of care he received doesn't bear that. Not to mention he actually had to go to Fargo for eye surgery.

Being a canadian myself, I've experienced the system first-hand and had to do things like wait for 12 hours at the emergency room (and that is considered normal nowadays), and to wait 6 months to see an ophtalmologist (or almost going blind, whichever comes first). So I can probably tell you a whole lot more than polls can.

Fact 1: Most canadians can't remember what health care was like before socialized medecine came along. They just know the system is deteriorating and most canadians have no real clue as to the reason why.

Fact 2: Someone earlier described our health care system as being Corolla service at a Corolla cost. Interesting analogy, but I would caracterize it more acurately as being a Camry or Solara cost, but getting service like a low end Chevy. Canadian health care is not cheap. In fact, it's the biggest expense on each province's budget (around 43% of the total budget in the province of Quebec), but government bureaucracy inefficiencies and lack of market pricing and competicion between care providers make for overblown costs and waste. Canadians are not getting the level of care they pay for, and most of them don't know it. (Or at least they don't have full understanding of it.)

Fact 3: Since Canadians do not have to pay out of their own pocket. They have no idea of the costs, leading to further wastage and abuse of the system.

All this to let you know that while you're debating wether to socialize medicine, we're debating about going the opposite direction. The problem with your health care system is a problem of lack of market competition between care providers combined with my third point. Going to a single payer system would make things worse. Not better.

Phil David writes:

I almost forgot...

You guys would be having monster tea parties if you were taxed as much as we are in Canada. Our tax freedom day this year was June 12.

I litterally spend half the year as slave to my government. Hope you guys wake up and smell the coffee.

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