So you want European-style health care

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Atul Gawande has a great piece in this week’s New Yorker on the many varied ways to get to additional, and even universal coverage.

Sidebar: Great, with the exception of his high praise for Paul “Ugh” Krugman, who he notes “received a Nobel Prize in Economics in part for showing that trade patterns and the geographic location of industrial production are also path-dependent.” Fact is, the insight that technology and trade patterns were “path-dependent” was well known to Piero Sraffa, neo-Marxian economist and author of The Production of Commodities by Means of Commodities. Yes, I know such obscurities can only be explained by personal histories. Dark histories. I wrote my undergraduate thesis on the man. To all accounts Piero was a lovely human being unlike Ugh. End of sidebar.

The common argument made in favor of universal care is that finally we would join the rest of the industrialized world–but usually with reference to becoming more like Europe. Well, you might want to reconsider the desire to join the enlightened after reading the National Center for Policy Analysis’ report on large unfunded liabilities for their generous health, pension and welfare programs. Quoting from the Executive Summary:

These countries remain politically committed to maintaining fiscal discipline, but large portions of their government budgets are funded on a pay-as-you-go basis. That means that no real resources are set aside and invested each year by government or individuals to prefund future expenditures on such programs. Spending on promised retirement and healthcare benefits for the elderly will increase.

Given that the Baby Boom generated has greyed (fewer workers to pay more generous benefits to lots of 68ers):

– The average EU country would need to have more than four times (434%) its current annual gross domestic product (GDP) in the bank today, earning interest at the government’s borrowing rate, in order to fund current policies indefinitely.

Scary numbers (and, yes, scary numbers always need to be verified, so…)

– By 2020, the average EU country will need to raise the tax rate to 55 percent of GDP
– By 2035, to 57 percent of GDP, and
– By 2050, to more than 60 percent of GDP.

On the US, the author (Jagadeesh Gokhale) notes that the “shortfall for Social Security and Medicare alone has been somewhat smaller than the EU average, at 6.5 percent of future GDP.” Where do we stand in comparison on actions needed? Yup, scary.

– The US would need to save and invest 8.2% of GDP beginning now and continuing every year forever to pay expected future benefits without future tax increases.
– This could be accomplished by more than doubling the current 15.3 percent payroll tax on employers and employees, immediately and forever.

Gulp. I love France and Italy, but I am not sure we have thought through the implications of being like them…