Critical Condition

The Health-Care ‘Crisis’ Ain’t What It Used to Be

How come the health-care “crisis” isn’t mobilizing public opinion for “reform” (better known as “government take-over”) as much as the president and his faction anticipated? When you look at the numbers, people should be running in the streets with torches and pitchforks.

After all, health-care spending is likely to account for 17% of GDP this year. As a share of personal consumption expenditure (after income-transfers via Medicare, Medicaid, and other government programs) it’s running at 19%, up from 6% in 1959. Surely, (as the Left insists) the masses can no longer pay for housing, rent, transportation, or the other necesseties of life.

Well, the fact is that the areas of personal spending not under the same heavy degree of government control that health care lies under have taken up a much smaller share of personal consumption expenditure, cancelling out the increase in spending on medical care. Indeed, spending on food and energy have gone down as a share of personal consumption spending by 13 percentage points — the same degree as the increase in health spending.

And that’s not because people are not shopping, travelling, or heating or cooling their homes as much. Rather, people buy food and energy in largely competitive markets, so that innovation outside health care has compensated for the dead hand of government that prevents higher quality and lower prices in medical care.

Indeed, despite the dramatic increase in the share of personal consumption expenditures committed to health care over the years, Americans’ spending on non-medical goods and services increased by $6,000 per capita (in inflation-adjusted 2005 dollars) between 1995 and 2008 — an increase of about one third, as I discuss in this short research article.

— John R. Graham is director of Health Care Studies at the Pacific Research Institute.