Why America Can Afford Unrationed Health Care!

WHY AMERICA CAN AFFORD UNRATIONED HEALTH CARE !

In February of 2008, the National Health Statistics Group of the federal government’s Center for Medicare and Medicaid Services released a report projecting that by 2017 health care spending will account for about 19.5% of the economy, and noting that in 2007 it totaled about 16%.

This trend alarms many, and the conventional wisdom is that health care cost increases must be reined in by major changes. Understandable as this widespread view is, the conventional wisdom is wrong. The problem with looking at the resources we devote to health care in isolation is that it misses both the fact that our economy is constantly growing and that due to productivity increases we need to devote fewer resources to other necessities like food, clothing and shelter. (see charts).

What most of us don’t realize is that increasing productivity means spending a smaller percentage on other necessities, freeing up resources that are used for health care. For example, while the average American certainly has a greater abundance of food now than in 1940, largely because of agricultural productivity increases, the percent of the average budget spent to get that food has steadily declined.

Finally, the third essential – shelter-- has tended to occupy the same amount of the family budget for well over a decade. Certainly, today’s housing has far more space, rooms, bathrooms and other amenities than the housing of the 1940’s for the same relative price. Despite the improvements in housing, it has remained roughly steady since 1960 as a percent of the average family budget.

Food, Clothing, & Shelter Combined

The portion of the family budget devoted to the three life essentials of food, clothing, and shelter has fallen steadily since 1940. What once took up over 50% of the family budget has dropped down to just over 30%. This has enabled the freeing of resources for other things of importance to Americans families – such as health care.

What We Spend on 1. Health Care and
2. Food/Clothing/Shelter Combined

The chart shows that the decline in how much Americans spend on food, clothing, and shelter, on average has more than covered the increase in what we spend on health care. By adding together the percentage of personal consumption expenditures on food/clothing/shelter (red bar) and that on health care (blue bar) we get the black bar – which has consistently hovered around 50% from 1940 until today.

**These charts are versions, derived from updated data, based on Figure 4.3 in Sherry Glied, Chronic Condition: Why Health Reform Fails (Cambridge MA & London: Harvard Univ. Press, 1997), p.103.