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Another View of Our Health Spending

By August 7, 2018Commentary

An interesting summary look at the state of health in the US was published in the Wall Street Journal.   (WSJ Article)   In one page it attempts to give a history of health spending growth, why it may have grown so much and a sense of what kind of health we get for all that spending.  While the average health spending as a percent of the national economy for the Organization for Economic Cooperation and Development countries went from about 5% in 1970 to 10% now, the US went from about 6% to 18%.  The spending growth has tended to come in spurts, driven by new government programs or new medical treatments.  And as the article states, this really is a problem of price.  Most Americans now live in markets dominated by a few providers and pay 10% to 25% more for that privilege.  Medical prices since 1970 have risen almost three and half times faster than general inflation.  Drugs and hospital care are particularly notable in their contribution to this trend.  Consumers tend to be unaware of some of this price growth because they are insulated from it, especially if they are covered by Medicare, Medicaid or are a government employee.  Privately insured patients have been hit harder by the cost growth.

And of course there are the usual few charts about how much worse our health status is, notwithstanding all that spending.  But most of this has to do with lifestyle issues and has nothing to do with spending and prices.  Life expectancy is lower because we like to shoot each other, use opioids, eat too much, and have car crashes.  When we do these stupid things, we get some of the best health care anywhere to help us deal with the consequences.  It is a myth that we aren’t getting good health care; we just haven’t solved the problem of how to motivate people to have better health behaviors.  And I am pretty convinced that giving them all that good health care despite their behavior is part of the problem.  You decouple people from the consequences of their behavior, they have no reason to change it.  And of course my favorite chart is the one that shows how much more spending health firms are doing on political lobbying.  Hard for policymakers to take those tough actions to control spending, like reining in drug pricing, when they are lining their pockets with contributions and being wined and dined at fancy restaurants.

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