Noam Chomsky (pictured right) has recently claimed, repeatedly, that moving to a publicly funded healthcare system would provide sufficient savings to eliminate the deficit from the US budget. In what follows I show why his claim is plausible.
Here’s Chomsky’s claim in black and white. In response to current discussion about measures for dealing with the US deficit, Chomsky notes that it is
Not even discussed … that the deficit would be eliminated if, as economist Dean Baker has shown, the dysfunctional privatized health care system in the U.S. were replaced by one similar to other industrial societies’, which have half the per capita costs and health outcomes that are comparable or better.
(Chomsky 2011b)
Here’s a relevant excerpt from Baker’s blog:
The problem with Medicare is that our healthcare system is broken; we pay far more than other wealthy countries for our care and get worse outcomes. We don’t need to fix Medicare; we need to fix our healthcare system, and this is something we should have started yesterday.
The remedies are actually easy; the problem is that the political will does not exist to challenge powerful vested interests such as the insurance industry, the pharmaceutical industry and the doctors lobbies. Close to 20% (about $500 billion a year) of our healthcare spending is wasted on financing the insurance industry and the paperwork requirements that it imposes on providers.
We pay almost twice as much for prescription drugs as other countries. If we could get our costs in line, it would save us close to $100 billion a year. If drugs were sold in a competitive market without patent protection, we would save more than $200 billion a year. If we paid our doctors the same salaries as those in other wealthy countries, we’d save another $80 billion a year.
(Baker 2009)
That’s a potential total saving, on the most generous interpretation, of $880 billion. That’s exciting. The normative claim that people should have access to publicly funded healthcare would be all-the-more convincing if it could be shown to save the US a bucketload of money. But notice that Baker’s talking about total healthcare spending, public and private, not simply healthcare spending from the US budget. You cannot claim savings in the private sector as savings to the US budget. If a public healthcare system reduces private healthcare spending, those savings cannot be claimed as budget savings because the expenditure was never counted in the budget. Therefore, for Chomsky’s claim to be true, a public healthcare system would have to provide sufficient savings in the US budget alone to eliminate the deficit—no easy task for a country that has a largely private healthcare system and a massive budget deficit.
So let’s crunch the numbers.