January 26, 2007 9:24AM

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.