NRL News
Page 16
March 2007
Volume 34
Issue 3

WHY AMERICA CAN AFFORD UNRATIONED HEALTH CARE

On February 21, 2007, the National Health Statistics Group of the federal government’s Center for Medicare and Medicaid Services released a report projecting that by 2016 health care spending will account for about 20% of the economy, and noting that in 2006 it totaled about 16 %. 

Predictably, voices of doom reacted with the claim that this rate of growth is unsustainable.  Karen Davis, President of the Common-wealth Fund, said, “The cost problem isn’t solved. ... Now, when you look at these numbers, you realize we have to get serious about trans-forming the health-care system.”

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 the fact both that our economy is constantly growing and that due to productivity increases we need to devote fewer resources to other necessities like food (see charts).

Data like that shown in this chart is what scares most people about health care costs: they keep rising as a percentage of everyone’s budget.		What most of us don’t realize is that increasing productivity in our economy means we need to spend 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 our individual budgets we’ve spent to get that food has steadily declined.
The chart shows that the decline in how much Americans spend on food, alone, has more than covered the increase in what we spend on health care. By adding together the percentage of personal consumption expenditures on food (green bar) and that on health care (yellow bar) we get the red bar – which hovered around 30% from 1940 through 1990 and then dropped to a bit over 25% in 2000.

Of course, INDIVIDUAL families face very real problems of health care affordability.  That is because neither income growth nor health care costs are spread evenly across all Americans.  The incomes of some people rise more than those of others, and some people’s incomes fall.  Some people encounter very heavy health care expenses while others get by with little more than an annual check-up and over-the-counter remedies.  The point is that these are problems of distribution.  It would be tragic if, because we are appropriately concerned about the hardship of some who find it difficult or impossible to pay for their health care, the government imposed limits on what anyone could pay to get unrationed lifesaving treatment.  The solution to inequality in health care lies in improving access to life-saving medical treatment for those who are poor, not in limiting access for everyone.

For more analysis of why America can afford unrationed health care, click here.