Paul Krugman Doesn’t Have Private Health Insurance

As long as Paul Krugman continues to write about health care — a subject about which he is woefully ignorant — we will never run out of fodder for posts at John Goodman’s Health Policy Blog. Just fact checking Krugman’s errors and omissions is almost a full-time job.

In his latest assault on reason and sensibility, he has this to say:

As it happens, I’ve recently had fairly extensive dealings with both our health care system and with the New Jersey DMV. In one case, I encountered vast amounts of paperwork, mind-numbing bureaucracy, and extremely frustrating delays. In the other, my needs were met quickly and politely.

So far, then, it’s DMV 1, private health system (and I have very good insurance) 0.

I am willing to concede that Krugman’s report of his own experience is probably accurate. But if we let the DMV manage the health care system would we get more efficient health care? Of course not.

Krugman makes two assertions over and over again in his columns: (1) that government health care is more efficient than private health care and (2) that the health care systems of other countries are more efficient than our own (presumably because other countries have more government involvement). In both cases, the underlying premise is that there is some fundamental difference between public and private health insurance. This is a belief widely held both on the left and the right of the political spectrum. It is a belief that is wrong.

One source of the error is the mistaken idea that Medicare and Medicaid are actually run by the government. They aren’t. Medicare in the United States is managed almost everywhere by BlueCross, Humana, WellPoint and other private contractors. These, of course, are the same entities that manage private health insurance. Much of Medicaid is privately managed as well. Furthermore, one out of every four Medicare enrollees and two of every three Medicaid enrollees are enrolled in private health plans, even though government is paying the bill. Moreover, in the rest of the health care system, private insurers pay providers the same way that the government pays. They use the same billing codes and pay for the same services the same way.

In general, private insurance in the United States is so heavily regulated that it bears no relationship to what we would find in a free marketplace. Indeed, what we call private insurance in this country is little more than private-sector socialism.

That leads us to the other mistake that is made at both ends of the political spectrum: the belief that other health care systems are radically different from our own. They aren’t.

Take the United States and Canada. I would say that the health care systems of these two countries are 80 percent the same. In both countries, third-party payers pay the vast majority of medical expenses. In both countries, the third parties pay by task. In Canada, when patients see a physician, it’s free. In the United States, it’s almost free. In both countries, normal market forces have been completely suppressed. Health care in both places, therefore, is bureaucratic, cumbersome, wasteful, inefficient, and unresponsive to consumer needs.

One reason so many people get misled is that in Canada, government is the third-party payer, whereas in the United States, about half of all spending is private. True enough, our public insurance looks just like the socialized insurance we find in Canada. But so does our private insurance.

People on the left and right who are prone to stress the differences between U.S. health care and the health care of other countries invariably ignore the 80 percent commonality and focus on the remaining 20 percent. On the left, the focus is usually on the ways we appear to be worse; on the right, the focus is usually on the ways we appear to be better. But even here the differences are narrowing, and I expect that trend will continue.

Doctors who object to managed-care interference with the practice of medicine in this country will not be pleased to learn that everything that is happening here is finding its way to other countries as well. Indeed, U.S. insurance companies are contracting with governments in other countries to export what they do here to other places. People who are concerned about rationing by waiting in other countries had better brace themselves. Waiting times are growing in the United States as well.

As for global budgets, a lot of state Medicaid programs already have them. They are about to go system wide in Massachusetts in the near future.


Comments (22)

Trackback URL | Comments RSS Feed

  1. Robert A. Hall says:

    Krugman has become a progressive propagandist masquerading as an economist. One can only take his seriously if one continues to take the New Your Times seriously. I think the Times will be gone by the end of Obama’s term. I will link to this from my Old Jarhead blog. (

    Robert A. Hall
    Massachusetts Senate, 1973-83
    Author: The Coming Collapse of the American Republic
    All royalties go to help wounded veterans
    For a free PDF of my 80-page book, write tartanmarine(at)

  2. Louise says:

    I wonder if people are really talking to Medicaid and Medicare patients about their experiences. Just from relatives, I’ve heard horror stories of how inefficient the system is and how much red tape surrounds things. The idea that there’s the panacea of care is ridiculous.

  3. Sam Fiorentino says:

    I went om medicare in August of 2011, since my company(self-employeed and one other staff member) Medicare was priamsry and I had seconadry coverage with Medical Mutual and now Aetna with Medigap plans and an Rx-D plan.
    I had a workerscomp claim (Ohio)for a chipped tooth related to coaching HS football. Under the new section 11 filing the Medicare MSP new (subrogagtio/coordination) department was automatically notified of my claim by Ohio BWC.
    Sounds pretyy simple so far Eh?
    After that happened none of my Medicare claims were being sent to MMO or Aetna for seconadary processing, they tabbed all my claims as being OBWC primary.
    Becuase I am an agent that does a large amount of HC business I thought I was pretty well prepared to handle this pretty simple fix by calling medicare.
    My 1st call to Medicare claims was a 23 minute hold to talk to a claims person. I explained what i thought the problem was and that maybe Medicare should not have been sending all my non-tooth related claims to OBWC. She said I had to call the new MSP department (new since HC bill passed) since it was now a “who is responsible question”
    Being a simple mined Italian I thought this was pretty cut and dry so I asked the claims person if Medicare A orB covered repairing teeth from an accident?

    She agreed with me the answer was no, but she could not corret this on her system, so I still had to call MSP Dept.

    I called on 3 days in a roow and was on hold for a toltal of 7 hrs and 13 minutes till I could talk to a person. I wnet through the same explanation and she said she could not fix it even though Medicare does not pay for teeth unless I got a release on the claim from OBWC. Lotsa luck on that one since OBWC has to by law leave medical claims open for 6-7 years.

    Now I called Senator Sherrod Brown and then Rep Beety Suttons offices to make them aware that the new law they voted for has some major problems. I explained what the problem was and niether office would help me because they would not admit the system was flawed since they voted for the bill. Maybe because I made the nmistake of tellling them I was an insurance agent familiar with claims processing didn’t help either.

    Suttons Legislative aid on healthcare admitted they told CMS to hire a private Insurer to do this needed clean-up of fraud/abuse/coordination instead of the CMS starting e new department that has never been good at this in the past.

    So for 3 and 1/2 months all my claims were still being sent to OBWC until I called Rep Steve lautourette and his office got a Medicare supervisor to actually call me on this issue.
    She agreed with my analysis of the problem and had a
    excetion letter processed to release my cliams to Aetna and MMO that had not been secondarily processed yet.

    To this day Browns nor Suttons office has ever responed to my letter and all the deatlis I snet to let them know this new monster they have created is s bigger mess than what already existed.

    I would love to have the option to replce Medicare with a private plan that I could pick with the type of coverage I would like, namely and HSA based plan after age 65.

  4. Devon Herrick says:

    I’ve recently had fairly extensive dealings with both our health care system and with the New Jersey DMV.

    The mere fact that Krugman has had extensive dealings with the New Jersey DMV is a testament to how inefficient government is at administering even simple regulations. The DMV is hardly known for wonderful customer service. I’m not suggesting the workers are necessarily to blame — they are trapped in a bureaucracy that they cannot change. Yet, the task of renewing a license is not at all complex. A database should alert them whether your license is in good standing. The exam (assuming Krugman had to take one) is basically checked by a computer and the eye exam is easy to measure. Comparing the DMV to our health care system is like comparing the creation of a piece of macaroni artwork made by your kindergartener to the assembly of a Boeing 747.

  5. Uwe Reinhardt says:


    You write: ” Moreover, in the rest of the health care system, private insurers pay providers the same way that the government pays. They use the same billing codes and pay for the same services the same way.”

    This is true, of course, but you should not say it out loud, lest you upset the folks at the American Enterprise Institute or the Heritage Foundation, who always accuse Medicare of being “fee for service,” as if private insurers were not fee for service as well.

    I’ll tell on you.

  6. Thomas says:

    I concur with Mr. Herrick’s parting remark. Also, I’d like to know which DMV Mr. Krugman visited, because I would consider booking a flight over to Jersey for it. It might save me some time compared to prior experiences at the local DMV.

  7. Alieta Eck, MD says:

    Finally– a clear admission that “private” health insurance is so heavily regulated that it may as well be government. Here in NJ, the plans have government mandated coverage, deductibles, co-pays and guaranteed issue. Choice here means a choice of logos on your insurance card. Frustrating, time-wasting “preauthorization” is standard, and red-tape and denials maddening.

    People who are willing to pay cash (check or credit card) for primary care are finding that the red tape just melts away. As we are about to face a massive shortage of primary care physicians, patients who value the private patient-physician relationship and are willing to just pay a fair fee will do just fine.

    The NJ DMV has chairs bolted to the floor, and cops watch the patrons to be sure we are not using cell phones. Not a pretty picture, but if that is what Paul Krugman likes, he can have it. And, as Devon Herrick so eloquently stated, the difference in what we do is so striking that the comparison approaches the ridiculous.

  8. JoeMac says:


    How come you have never mentioned Pauly’s article, “Insurance reimbursement” from the Handbook of Health Economics. He discusses the source of third party payment.

  9. Slater says:

    I’ve been to the DMV, and I know my experience was not as pleasent as Mr. Kruman’s. I’ve also been to a U.S. post office that did not sell stamps…. I was infuriated when I walked in, went up to the clerk and was told that “this particular Post Office is not authorized to sell stamps”. Why??? It’s amazing how difficult the government makes it to opperate in an efficient manner.

  10. Al says:

    It is true that our healthcare system today even with our “private insurers” is socialized to a great extent, but today these insurers do not have the protection of a government system that will invariably change many of the judicial rulings and threats that restrained them in the past. Those restraints prevented some of the actions that negatively impacted patients and will not be as available in the future. There are many other differences that though only rarely are seen have a tremendous impact. For example the bureaucracy of government is far more difficult for a patient to manage than the bureaucracy of a “private insurer”, both for the patient and the doctor trying to advocate for his patient. Today a patient always has a second shot with the judicial branch of our checks and balances system and with government intervention. These extra avenues of action weigh heavily upon insurers and have a far greater effect than what you might believe based upon the thoughts behind your comment ” 80 percent the same”. We are said to be genetically similar to monkeys and apes (96%-98%), but that slight difference has had a great effect.

  11. KBGunner1 says:

    Doesn’t everyone realize that the NJ DMV is now run by a private company, and has been for years? I wonder what Krugman would have written if he visited the DMV 15 years ago.

  12. James says:

    Dr. Goodman: when comparing health care in Canada vs. the US, I think you’d have to agree with one indisputable fact: the cost of care in Canada has been increasing at a slower rate than the cost of care in the US since the mid-1970s when the Canada Health Act was fully implemented. So, if 80% of health care in the US and Canada is identical, why can’t we adopt Canada’s financing system and save money?

  13. Kyle says:

    His solution to endless paperwork, bureaucracy, and inefficiency is state control.


  14. vikingvista says:

    Kudos for emphasizing the infrequently acknowledged but great extent (“80%”) to which so-called private health care in the US is really socialized.

    So I will forgive you for downplaying the extent to which it is not socialized, and the impact of the changes Krugman et. al. would like to see imposed upon that “20%”.

  15. John goodman says:

    @ Uwe

    I agree. some of my friends have been misled by the words “private” and “public.”

    @ James

    We don’t need the govenment to have the Canadian system. I have been telling the UAW and the car companies for years that they can create an HMO, tell it to ration care the way the Canadians do and voila, there you have it.

  16. Steve says:

    It is pretty funny that when Krugman finds an example of the government outperforming the private sector you rebut it by saying the private sector isn’t really private.

    For Sam Fiorentino you always have the option of using private insurance rather than Medicare. In fact you can insure yourself if you feel like it. You really don’t think people like Warren Buffett are going to the doctor using Medicare do you?

    For Robert A. Hall so the NYT is worthless? Maybe you should ask Mr. Romney how worthless the people at the NYT are. He could have saved a lot of people a lot of money if he would have told them a little earlier he had no chance of winning. Unless of course the whole game is rigged and he knew he had no chance but kept taking money just to pad his followers. The choices aren’t very good. The Romney campaign (and Republicans in general) were either incompetent or crooks. Just let me know which one you think is correct.

  17. Linda Gorman says:

    Extensive dealings with the DMV? What has he done? Lost his license? Bought a used car with a dodgy title? Let his car registration expire?

    Most people deal with the DMV for cut and dried things like license renewal and car registration. The equivalent comparison in health care would be getting a flu shot.

    How hard is that?

  18. steve says:

    I have been in charge of billing for our group for years. It is simple and easy for Medicare. Complicated for the private insurers. There are no regulations that require they make billing so difficult. There is no regulation requiring that they pay late. On the other side, I think it pretty clear here that not many people have had the pleasure of negotiating the complex bills from a private insurer for a major illness.


  19. Wanda J. Jones says:

    John and Friends–Krugman has these old 33 1/3 records playing in his head that only say one thing: private is wrong, government is right. How long ago did he quit looking at actual facts? Too hard, I guess.

    For all those who love to tout government healthcare, one does not have to go to another country to find a different case example about government care; the US has had many examples of government care that was wholly-owned, wholly managed, and wholly paid for by government, usually by a line item budget. Here are those that I can remember:

    The Public Health Service Hospitals devoted to the maritime industry and victims of epidemics. (Polio, TB)

    Most of the military hospitals from WWII.

    Most of the county hospitals built to serve the poor.
    (Redundant after Medicaid became available.)

    The Indian Health Service hospitals.

    Most of the traditional state mental health facilities for the chronically mentally ill and developmentally disabled.

    Most of the free-standing emergency hospitals, of which there used to be 13 in SF.

    The hospitals of the prison health system in California. Care was so bad that this system had to be taken over by a Special Master appointed by a Court, which is leading to construction of a new facility in Northern California at the currently high capital costs for other hospitals.

    If government medicine is so hot, why have government programs switched out of running their own facilities and decided to send their patients to private facilities? Krugman can’t have it both ways–tout government performance in the case of the DMV, yet ignore actual performance in a direct health system ownership role. Of course, He will alledge that some privately-trained managers probably got in there and messed everything up. Actually, in some states, governments do contract with private healthcare management companies as otherwise they could not hire trained hospital managers to work in their facilities.

    It is painful to read about the confusion and bureaucracy in dealing with private health plans. Note that states license these plans, regulate them, tell them what mandated benefits they must offer in their policies, and tell them how to adapt to the findings in any healthcare lawsuits.

    [I bought a house three years ago, with a stack of paperwork 3/4 of an inch thick, requiring about 20 signatures throughout. The clerk said: “Every page is a lawsuit.” Same in hospitals; every form is a lawsuit. All those consent forms; all those discharge instructions, all those repetitions of one’s medical history, (Isn’t that in the computer?) and all those interminable re-listings of meds–all have their roots in legal obligations that must be fulfilled.
    I now just begin any interaction with a health professional in the hospital with my name and birthdate, to make sure that I am really myself.

    Remember, only government can write impossible regs and regulate mandates–so only government can remove them. I’m sure that the private sector would appreciate any leadership that can come from pundits or elected officials to modernize the legal context of our field.
    I know I would.

    Wanda J. Jones, MPH
    New Century Healthcare Institute
    San Francisco

  20. Steve says:

    Wanda not sure if you payed attention to that recent election we had but those facts you are talking about finally decided this whole debate about which side is living in a bubble. Krugman will spin facts to his advantage but let’s just say I’m not worried he’s going to tell me the earth is 6000 years old.

  21. Ramesh Chandra says:


    Krugman is as ignorant of economics as health care.

    So does O.

    All these guys aggregate their kooked up data and win Nobel prices.

  22. Ken Rohleder says:

    With the passage of EMTALA in 1986(the act that requires emergency rooms to provide care to the indigent)health care became a de facto right in the United States that is unfunded by the federal government.

    I propose treating healthcare like education: The government provides a rationed system that covers everyone and scaling-up the VA is a sensible way to do that. Parallel to the government health service would be a private system that is funded through a deregulated health insurance industry that can compete for business in any state nationally.

    Like the VA, the government health service would save lives by caring for the uninsured or under-insured or anyone in the US who walks through the door needing help. It would allow us to eliminate Medicare and Medicaid (which are insurance schemes) and we could eliminate workmens’ compensation insurance which is a noose around the neck of manufacturing in this country.

    Many (maybe most) Americans would opt for private health insurance anyway and the government services would be a backstop only. Employers could offer supplemental plans as inducements to attract the best talent, but they should not be required to and individual patient data should be absolutely invisible to any employer.

    The federal government in the richest country in the world has an obligation, and we have an obligation to each other, to provide universal health care to everyone, just as we provide an education to everyone.