fatvegan

Economists from across the political spectrum understand that one of the major factors driving health care costs is our third-party payment system that insulates consumers from the cost of their health care decisions.

More Than A Theory: Medical Savings Accounts at Work (CATO)

I'm not sure what CATO considers the full range of the "political spectrum" to be, but this statement is pretty much just wrong. There are plenty of economists who don't believe this, and if I count as an economist then I am one of them.

You could conceivably argue that the reason we have "high" health expenditures is because our system "insulates consumers from the cost of their health care decisions". But I can't understand how a system that has scarcely changed in 30 years accounts for the rapid increase in health care expenditures over that same period. The US system has probably became less socialist in that time, and yet health expenditures are increasing a lot. It seems to me that it's less a problem of overconsumption and more a "problem" with the income elasticity of demand for health care. As people get richer they look after themselves better and spend more on health.

But it's still a crisis the economists will say. Health expenditures can't grow faster than income forever. It's true, but isn't necessarily a problem for a long time yet. If our income increases by 5% each year, it's really no problem if our health expenditures increase by 10% each year. Obviously that can't happen for ever, but we don't have to worry about it just now.

Using that example, we have another 60 years before we have to be concerned. If health expenditures continue to grow by 10% and total income continues to grow by 5%, the amount of money we have left over after health care won't actually drop until 2070.

And if health expenditures grow by 15% a year (instead of 10%) then we still have 30 years before our residual income will drop. At that point we'd be spending 77% of our income on health care and we'd still have more money to spend on other stuff than we have now.

Alternatively, if income only grows at 2% (instead of 5%) and health care costs grow by 10%, we also have 30 years.

So I really feel like it's not a big deal. When they make scary claims like "health care costs are rising by 15% every year" you forget that we only spend 5% of our income on health right now.

My original point was mostly just that CATO are silly. And they are. But they're not the only ones. Every research paper or news article about health insurance or health system finance seems to include some spiel about the impending health funding crisis. Sometimes I wonder if economists and bureaucrats just love having crises to make themselves feel important.