Monday, August 25, 2008

We’re Spending More On Health Care Because We’re All Richer Now?

I’ve written a lot about health care, believing that if we solve this one problem, we will free up incredible amounts of money and advance a new age of entrepreneurship. We won’t have to worry about starting a new business and losing our current health care plan through our employer. Costs will be held down dramatically through a national buying plan, and people will forgo huge insurance bills for long term care and costly riders. Spreading the costs with everyone, healthy and sick, will finally realize the true nature of insurance.

So imagine my surprise when a Nobel Prize winning economist told a German crowd (one that enjoys a national health plan) that the increased spending on health care in the U.S. isn't pricing people out of health care but enticing them to spend more, because people are getting richer. A strange concept when actual buying power has gone down for the majority of Americans. But in Robert Fogel's world, rising medical costs is good thing. The Wall Street Journal continues it’s downward slide with this.

82 year old Robert Fogel, a Nobel Prize winning economist from the University of Chicago, says rising spending on health care in developed countries reflects rising income of consumers with strong appetites for health care and squelching that demand ought not to be a primary goal of governments.Predicting that health care spending is likely to rise from roughly 15% of gross domestic product today to between 21% and 29%, Fogel argued: “As people get richer, they want to spend a larger share of their income on health. Is that bad? Should such a development be
arrested? Should government seek to thwart consumer demand for health care?” he asked. His answer: No! “Public policy ought not be aimed at depressing demand
for health.”

He noted that Americans in 1875 spent 74% of the income of food, clothing, shelter and consumer durables. Today, thanks in part to rising incomes and rising productivity in the production of those necessities, such spending accounts for only 13% of American incomes. The result has been a rising share of income devoted to leisure — including working fewer hours than earlier generations did — and to health. Health care spending, which accounted for just 1% of consumers’ incomes in 1875, today accounts for about 9%, he said.

Who is Fogel talking about when he says were working fewer hours and devoting more time to leisure?

Fogel only makes sense when he includes this caveat: “Pressure to restrain costs comes from employers and governments who pay the bill. The solution is to offer a universal package of basic-health care services and then require consumers to pay for additional services — including private hospital rooms, shorter waiting times, expensive elective surgery, he said. “There are large luxury aspects to health care that are not necessary for basic health….Rich countries want a lot of convenience with their health care.”

Except for paying for shorter waiting times (crazy), I can see holding the line on costs by putting some of his idea’s into play, but only after all attempts to hold down costs have failed. And as a last resort.

He then goes crazy again with this:

He predicted that developed countries will move to private health-care accounts funded by forced savings, i.e. contributions that workers are required to make.

Like health savings accounts? It’s not a solution. I have one, and each year, the price goes up $1200. Forever. I also don’t put money into the account because I can’t afford it.
The answer again is simple: a single payer system.


  1. This comment has been removed by the author.

  2. (I deleted the above comment because of a horrible typo that creeped in.)

    Anyways, The only reason I'm going easy on Fogel is because I take care of people around his age who are showing signs of senility.

    In my family, there is a direct correlation between paying higher health insurance premiums and higher out-of-pocket costs and decreased spending on Christmas presents. I guess the powers-that-be would prefer that we, as a nation, pay more money to the health care industry than to shopping malls.