Canada May Have the Cure For US’s Medicare Ailment

I keep hearing people say that Medicare in its current form is not sustainable in the United States, as if that were an established fact. It’s anything but.

What is Medicare? It’s single-payer coverage for the elderly.

Other countries have single-payer systems that are much cheaper than ours — and also much cheaper than private insurance in America. So there’s nothing about the form that makes Medicare unsustainable, unless you think that health care itself is unsustainable.

What is true is that American Medicare is expensive compared to, say, Canadian Medicare (yes, that’s what they call their system) or the French health care system (which is complicated, but largely single-payer in its essentials); that’s because American-style Medicare is very open-ended, reluctant to say no to paying for medically dubious procedures, and also fails to make use of its pricing power over drugs and other items. So Medicare will have to start saying no; it will have to provide incentives to move away from fee-for-service, and so on and so forth. But such changes would not mean a fundamental change in the way Medicare works.

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Of course, what the people who say things like “Medicare is unsustainable” usually mean is that it must be privatized, converted into a voucher system, or whatever. The thing is, none of those changes would make the system more efficient — on the contrary.

So this business about Medicare in its present form being unsustainable sounds wise but is actually a stupid slogan. The solution to the future of Medicare is Medicare — smarter, less open-ended, but recognizably the same program.

Medicare Sustainability

Just a further data note. Canada’s Medicare is actually a lot like Medicare in the United States, but less open-ended and more serious about cost control. Here’s a chart showing Canadian spending on health versus American spending, both as percentages of gross domestic product.

Health Care Spending, USA and Canada

Hmm. Canadian Medicare looks pretty sustainable, especially as compared to the American system, which has much more private insurance.

Now, Canadian health care isn’t perfect — but it’s not bad, and Canadians are happier with their system than we are with ours in the United States. So anyone who tells you that Medicare as we know it — a single-payer system that covers everyone over a certain age — is unsustainable is ignoring the clear evidence that other countries somehow manage to make similar systems quite sustainable.

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Paul Krugman joined The New York Times in 1999 as a columnist on the Op-Ed page and continues as a professor of economics and international affairs at Princeton University. He was awarded the Nobel in economic science in 2008.

Mr Krugman is the author or editor of 20 books and more than 200 papers in professional journals and edited volumes, including “The Return of Depression Economics” (2008) and “The Conscience of a Liberal” (2007). Copyright 2011 The New York Times.