In their new book, “Deaths of Despair and The Future of Capitalism,” Princeton economists Anne Case and August Deaton describe how a changing economy, the opioid epidemic, an overly expensive healthcare system, and the collapse of social institutions have combined to inflict misery upon large segments of the U.S. population.
In particular, white working-class people without college degrees seem to be suffering heavily, as reflected in grim statistics Case and Deaton discovered: “Deaths of despair,” defined by rates of deaths by suicide, drug abuse, and alcoholism, are rampant in this group compared to other demographics, even ones that face similar levels of poverty. (U.S. 1, March 11, 2020.)
Case and Deaton, who are married, were scheduled to give a highly anticipated talk at Labyrinth Books on Thursday, March 12. Needless to say, the event was canceled, as almost every event was, in order to slow the spread of coronavirus. A substitute Facebook Live event was also cancelled.
The failings of the healthcare system as well as capitalism overall, which are discussed in the book, have been subjects of debate during the Democratic presidential primary. They are also being put to the test as the United States stares down the barrel of a historic healthcare and economic catastrophe in the form of the coronavirus pandemic.
In Chapter 13 of their book, Case and Deaton describe the dysfunction of the United States’ system of employer-provided healthcare:
Americans spend vast sums on healthcare, and that spending affects almost every part of the economy. Healthcare is expensive everywhere, and it makes good sense for rich countries to spend a large share of what they have to extend their citizens’ lives and to reduce pain and suffering. But America does this about as badly as it is possible to imagine.
Our argument is less about the direct harm that healthcare can sometimes do, through medical mistakes, through poor treatment, through the prescription of opioids, or through not providing treatment when needed. It is more about the indirect harm to people’s lives and work that comes from its extraordinary and extraordinarily inappropriate costs.
The US Healthcare System, which absorbs 18 percent of the American gross domestic product (GDP) — $10,739 per person in 2017, about four times what the country spends on defense and about three times what spends on education — is needlessly eating away at workers’ wages. Paying for it reduces take home pay as well as the value of what that pay will buy. It inflates the earnings of those in the healthcare industry and makes the industry larger than it ought to be. The cost of employer-provided health insurance, largely invisible to employees, not only holds down wages but also destroys jobs, especially for less skilled workers, and replaces good jobs with worse jobs. As people take worse jobs, their wages fall. Healthcare costs also strike directly at those individuals who are without insurance or have inadequate insurance, and they affect those who are insured through copayments, deductibles, and employee contributions. They also affect the federal government as well as state governments, which pay for Medicare and Medicaid. Governments must collect more taxes; provide less of something else, such as structure or public education, on which poorer Americans particularly depend; or run deficits that can compromise future economic growth, shifting the burden to our children and to future taxpayers.
To use Adam Smith’s words about monopolies, the American healthcare system is both ‘absurd and oppressive.’
Healthcare is necessarily expensive, and there is no doubt that we should be spending a lot on it; it makes good sense to give up some of our wealth for better and longer lives, and to do so by more the richer we get. New treatments that prolong life or make it better are continually being produced, they can be expensive to invent or to use, and it will often be a good idea to pay those costs. That said, we spend too much and needlessly so. We will argue that we could cut back costs by at least a third without compromising our health.
As we saw in chapter 9 on opioids, one part of the healthcare industry manufacturers and distributors of pharmaceuticals-became enormously wealthy by triggering an epidemic that has killed tens of thousands of people. This is an extreme example of direct harm to health, as well as of the process of upward redistribution in which those at the top got rich at the expense of everyone else, many of whom were put at risk of addiction and death. This direct harm to health must be charged to the healthcare industry along with the indirect harm from the economic tribute that it is exacting from the economy as a whole. Death by accidents overdose is the most prevalent of the three kinds of deaths of despair many of these can be attributed to the opioid epidemic spurred by the industry, though we need also to look at the deterioration in lives that predisposed some people to addiction. Deaths by suicide and alcohol rising among those who are finding work and family life increasingly difficult. Those deaths are being hastened by the costs of healthcare.
In the next chapter, we discuss other industries and how they too may have contributed to deaths of despair. Yet healthcare is different, not only because it can kill directly but also because the economics of healthcare are fundamentally different from the economics of other industries. While free-market competition is a good benchmark for much of the economy, where we can rely on the market to produce good outcomes, that is not true for healthcare. Free-market competition does not and cannot deliver socially acceptable healthcare.
Case and Deaton answered several questions from U.S. 1 about their book’s arguments in light of current events.
Your book describes how wasteful our system of employer-provided health insurance is. Do you have any comment on the different healthcare reform proposals by Biden, Sanders, and Trump?
We have tried to stay away from commenting, let alone, endorsing any specific plan. Our concern is not only that it is employer provided (which of course means worker provided) but that it is also so incredibly expensive. Getting costs down should be the key concern for any plan. Does Trump have a plan? Other than dismantling Obamacare?
In your book, you described how the healthcare system leaves people out and causes death and economic misery at the best of times. How do you think it will fare in the face of a pandemic?
It is true that people are left out, meaning not insured, but that is NOT what is causing death and economic misery. The labor market for less educated Americans has been deteriorating for a long time. Globalization and automation are big reasons, but so is the cost of healthcare, because low-paying jobs cannot support the cost of health insurance.
Our system is not prepared for a pandemic, and some features — too few doctors, too few nurses, monopoly hospitals, high prices — will be particularly harmful. But no health system in the world is well prepared for this. Britain has a radically different system, and they too do not have enough beds or nurses or doctors. Italy has now had about the same number of deaths as China. There has not been a pandemic like this for a century, and no country could have been expected to have had thousands of spare ventilators or ICU beds that they normally do not need.
Do you think the pandemic might be the impetus for the political will to alter the dysfunctional systems you outline in your book?
It might, but that is very unpredictable. People will certainly be looking for things to blame.
Of all the points you made in your book, are there any that strike you as particularly salient now that we are staring down the barrel of a potential world-historic health and economic crisis?
Yes, the epidemic that we write about, which killed 150,000 people in 2018, has roots that stretch back to the 1970s. It is not going to go away soon, and will be killing people long after coronavirus has gone. We need to remember that.