The price performance of American schools came up, in a discussion with MathBabe on the Chicago teachers’ strike. It is hard to find clean, international statistics on this. Below, we have comparative educational spending from the OECD and science test results from TIMSS.
For countries common to both studies, we can do a scatter plot (below). The first thing you notice is that spending is not correlated with results. The Asian countries spend in the middle of the pack, and achieve the best results. America outspends everybody, and achieves mediocre results.
So, what’s the solution? If you are in business, you have heard the expression, “throw money.” It means that a manager lacks the skill to fix a problem, as in, “he was just throwing money at it, so we fired him.”
Jeremiah, and The Economist, believes the solution is to privatize the schools using a voucher system. Economists agree this would lower costs and improve results. So do parents, judging by their enthusiasm for charter schools. It seems likely that many teachers would support reform, too. Good teachers would do well in a competitive system. Sadly, they are outnumbered.
See also: Waiting for Superman
Jeremiah’s vision for health insurance is a broad national market like the one for auto insurance. Everyone will buy it, and insurers will compete on cost and service. Health insurers will then drive innovation and cost control, as the IIHS does today.
Some feel that “individual mandate” infringes a constitutional right not to have insurance. This is an impractical theory that only holds up if hospitals have an offsetting right to deny care. Since people are going to turn up in the Emergency Room, they must have health insurance – just as everyone who might need a car repair is required to have auto insurance.
Congress should outlaw enrollment restrictions such as “pre-existing condition,” but allow insurers to charge a competitive price based on the enrollee’s health – and then make subsidies available for those who demonstrate financial need. Help with premiums would be the only application of public funds, and the only avenue for redistribution.
The subsidies would be offset by ending the tax deduction for employer-paid health insurance – with no special pleading for union jobs. Workers who think their company plan is free are sadly mistaken. The only benefit in this “benefit” comes from the tax deduction.
Jeremiah was shocked to learn that there are barriers to interstate competition. These have to come down, and this is an appropriate use of federal power under the commerce clause. Speaking of states’ rights, there should be tort reform but it should be at the state level. If Missouri wants to run the doctors out and the premiums up, that’s their prerogative.
Lastly, Congress must allow pharmaceuticals – with appropriate safety regulation – to be imported. Drug companies have a right to recoup their R&D expense, but they don’t need to recoup all of it in America. Once there is a vibrant market for health insurance, we will see the insurers do battle with the drug companies. Voters will love that.
See also: New York Times
Bright young people in France aspire to join the social service. The “public sector” is where the cushy jobs are found, with fat salaries and benefits courtesy of French taxpayers. College kids in France do not create Facebook in their dorm. There is no French Google, Microsoft, HP or Yahoo. These American companies were all founded by entrepreneurs.
America still has a thriving private sector. Ambitious people, young and old, can start their own companies. New companies mean fresh opportunity for all workers. A vibrant market, properly regulated, is our best guarantee of financial security. Private employers in France have a tough time:
Social-security contributions are high, the working week is short, the labour code is strict and shedding jobs is slow and difficult. Taking on an employee in France is a risk, so employers avoid it as best they can.
French lawmakers were keen to fund social programs, and build government agencies, at the expense of private enterprise. They were not looking at the big picture. If everyone is a government employee, there are no net taxpayers.
Private employers are the engine of growth in any economy. They create the jobs and pay the taxes. America is now treading the path behind France, with rising taxes, deficits, and expensive new government agencies. Congress must renew its support for private enterprise, or we will kill the golden goose.
See also: On Socialism
Employer-paid health insurance is a trap for the working man. You think you’re getting it free, but the money ultimately comes out of the payroll budget. Plus, it’s a write-off for the employer, so you end up paying higher taxes. You also get lousy service, as everyone knows. The boss is paying the premiums, so the insurer has no incentive to treat you fairly. Finally, if you ever change jobs, you have to qualify all over again (the dreaded “pre-existing condition” exclusion) and probably change doctors.
The insurers also have no incentive to control costs. To make their numbers, they only have to cheat the patients – no pressure on the hospitals or the drug companies.
The courts have fixed some of the abuses, but the real solution is to give workers the power to choose their own insurance. The industry will change rapidly once the patient is the one holding the checkbook.
Paying your own health premiums is not a new expense. You’re already paying for it. You’re just not getting the service you deserve. When you buy your own insurance, you’ll have the power to switch and to shop rates. Think of how you buy auto insurance, for example. If you like your coverage, you’ll be able to take it with you when you change jobs – and you don’t have to live in fear of losing coverage if you lose your job.
People who can’t afford insurance could get grants from the government. Jeremiah is no fan of government subsidies, but these people are going to end up on Medicaid anyway. Subsidizing private insurance premiums will be easier on the taxpayer than supporting Medicaid.
Successful health reform should end the deduction for employer-paid programs, enforce an individual mandate, and open the market up to interstate competition. The power to choose is the power to change.