Is Rising Health Care Spending Necessarily a Concern?

Investors’ Business Daily correctly notes that a rapid climb in health care spending is not a cause for concern if it reflects a society that has more disposable income. Indeed, the editorial notes that spending on recreation and on computers has climbed even more rapidly:

[Health care] spending appears to be increasing at an alarming rate, up 362% between 1984 and 2004, according to the Bureau of Economic Analysis. The Kaiser report says that health spending as a share of gross domestic product went from 8.8% in 1980 to 15.2% in 2003.

But is this really a crisis in desperate need of a government solution? The short answer: No. Unless, of course, you also think that we have a recreation crisis, or a fitness club crisis, or a computer crisis. After all, spending on these and other things went up just as fast, if not faster, than spending on health care. Recreation spending, for example, was up 386% between 1984 and 2004. Spending on health clubs was up more than 300%; spending on computers rocketed 600%.

Just because spending on health care is going up at a fast pace in the U.S. isn’t necessarily a sign that something is wrong. More likely it is a sign that we are a wealthy nation that, by and large, has taken care of the essentials of life. As a result, we can afford to spend a bigger chunk of each extra dollar we make on former luxuries, like better vacations, a new laptop and gold-plated health care.

The big difference, however, is the government-created third-party-payer crisis that has undermined market forces in health care. As explained by Michael Tanner and Michael Cannon, the solution to rising health care costs is less government, not more.

Topics: