Krugman Analyzes Obama's Health Care Plan

Paul Krugman takes a look at Barack Obama's health care plan that he unveiled last week.

First, the good news. The Obama plan is smart and serious, put together by people who know what they’re doing.

It also passes one basic test of courage. You can’t be serious about health care without proposing an injection of federal funds to help lower-income families pay for insurance, and that means advocating some kind of tax increase. Well, Mr. Obama is now on record calling for a partial rollback of the Bush tax cuts.

Also, in the Obama plan, insurance companies won’t be allowed to deny people coverage or charge them higher premiums based on their medical history. Again, points for toughness.

Best of all, the Obama plan contains the same feature that makes the Edwards plan superior to, say, the Schwarzenegger proposal in California: it lets people choose between private plans and buying into a Medicare-type plan offered by the government.

Since Medicare has much lower overhead costs than private insurers, this competition would force the insurance industry to cut costs — making our health-care system more efficient. And if private insurers couldn’t or wouldn’t cut costs enough, the system would evolve into Medicare for all, which is actually the best solution.

So there’s a lot to commend the Obama plan. In fact, it would have been considered daring if it had been announced last year.

Now for the bad news. Although Mr. Obama says he has a plan for universal health care, he actually doesn’t — a point Mr. Edwards made in last night’s debate. The Obama plan doesn’t mandate insurance for adults. So some people would take their chances — and then end up receiving treatment at other people’s expense when they ended up in emergency rooms. In that regard it’s actually weaker than the Schwarzenegger plan.

It should be noted that Krugman was very supportive of Edwards' health care plan back in February.