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The Cause of Rising Health Care Costs
A strong case has been made that the reason for high
health care costs is rooted in the growing third
party pay system. One simply needs to envision what
would happen to food costs if employers started
providing food insurance. When you reach the
checkout counter the bill is simply charged to your
food insurance company. Since you are using someone
else�s money to pay for your food�price would not be
a consideration�Super Markets would give way to
Gourmet Markets�with food costs skyrocketing. We
simply do not spend somebody else�s money as wisely
or as frugally as we spend our own. Then as the
government would attempt to remedy the rising food
costs by expanding the third party pay system�with
government provided food insurance�food costs and
Gourmet Markets would simply expand further. This
would continue us down the never ending spiral of
growing food costs�in the exact same fashion that we
have endured with never ending health care costs.
World War II wage ceilings spawned the proliferation
of employer-provided medical insurance. In 1954 the
Internal Revenue Code made employers?contributions
to health care plans tax exempt. In the early
fifties, union membership became mandatory for over
two thirds of the production work force. This
enabled the unions to establish compulsory health
insurance for a large segment of the working
population. In the next place, the enactment of
Medicare and Medicaid in 1965 made the government a
third-party payer for persons and medical care
covered by those measures. The following chart
clearly shows how the accelerated use of third party
pay systems and the rapid increase in health care
costs have gone hand in hand.
Spending on medical care went from 3 percent of the
national income in 1919 to 4.5 percent in 1946 to 7
percent in 1965 to a mind-boggling 17 percent in
1997. The changing role of medical care in the U.S.
economy is truly breathtaking. To illustrate, in
1946, seven times as much was spent on food,
beverages, and tobacco as on medical care; in 1996,
50 years later, more was spent on medical care than
on food, beverages, and tobacco.
This information helps provide the knowledge needed
to accurately assess the cause of rising health care
costs which would in turn lead to real solutions
to the problem.
The Solution therefore would be in restoring
personal responsibility to the health care
consumer�by structuring the payment to go through
the individual�which would in turn reintroduce
competition to the health care industry
thereby�reducing health care costs.
The health care crisis we now face is a result of
the method of financing and of extensive
intervention by government in the medical
marketplace. The gradual transformation of medicine
into a wasteful and inefficient industry came about
in direct proportion to our failure to follow the
golden rule of market economics: Let the person who
benefits from a product or service pay for it as
directly as possible. If most consumers had a
substantial financial stake in the cost of their
care and had access to information on the quality of
competing hospitals and physicians, the medical
industry would, seemingly overnight, be transformed
into a model of economic efficiency and prudence.
Millions of Americans have inadequate health
insurance or none at all. The solution to this
problem is not to provide blanket insurance coverage
at taxpayer expense, but rather to drive the cost of
health care down to a level where the poor can
afford to purchase basic health care. This is not a
pipe dream. It is a matter of unleashing against
the medical industry that most potent of market
forces: the economic self-interest of the
individual.
The Non-Solution is using the same third
party pay system that created the problem to solve
the problem. We see all this unsound �Government
Takeover of Healthcare Option?program being
misrepresented, �sold?to the public, if you will�by
the public's own representatives in government�as
though it were a free service by a great and wealthy
and indulgent government. And we see our government
keep trying to give the impression to the vast
majority of citizens that it can get the money from
somebody else�while the costs of the so-called
�free?benefits will be taken directly and
indirectly out of the pockets of the whole
public�from you and me�from everybody.
We have been led to believe some magic, some escape
from the rules of arithmetic, is possible.
There seems never, never any honest explanation that
all of us pay the bill, and pay it soon, if not
immediately. We've got to learn that�in government
programs as elsewhere�there isn't any such thing as
�a free lunch.?/p>
The plain fact is that most all politicians in all
parties and all lands�no matter what their private
convictions on economic matters�think that the
majority of adults everywhere are so misinformed
that they not only believe �something-for-nothing?
is really possible, but demand it. They think the
public just would not understand or support them if
they spoke and acted soundly.
For years, from within our own government has come a
persistent endorsement and following of such unsound
and demagogic ideas�so much so as to be an actual
attack from within on the very free economic and
political system our officials are sworn to defend
and protect.
Too many of us just do not understand how we got
this standard of living that's the envy of the rest
of the world.
The free market system offers the incentive to work,
create, compete, save, invest, and profit.
But there must be either force to drive men to work.
Or there must be incentive to make men want to work.
It's �the carrot or the stick��now, as in all
history of man or other animal.
The penalty for such economic ignorance can be�is
already�very great in both the economic and
political fields. Our free markets and our free
persons are at stake.
Let's keep in mind that communism and socialism did
not used to be known by the current erroneous
concept as being two different things. Communism is
just a slight variant of socialism, as were fascism
and nazism, and as now the European type of
socialism which is just communism a little less
brutal, a little more gentlemanly yet, and in not so
much of a hurry.
Our great problem in this country�and the world�is
to learn the economic fallacies of the whole
socialist theory�and then to act accordingly to keep
people from being fooled and pauperized and silenced
and enslaved, and to keep our great nation�as we
know and love it�from going on the ash-heap of
history.
It has become popular, and therefore politically
expedient, to heap injustices upon the free market,
and even to put limitations on our businesses
carrying out what people want them to do for them.
How do people all over the world get this way? Why
do they reject the free market, which has a 100%
record of raising the standard of living through
voluntary action inspired by the incentive to save
and to compete? Why do so many choose, instead, the
government planners�skimming off for state purposes
everything above a bare subsistence standard of
living�and with their inevitable necessity in the
end, directly or indirectly, of having to shut off
free choice and free speech in order that their
planning failure will be masked?
If we want bad�or even good�leaders to do what is
right economically and politically, we must see that
a majority of us, as citizens at the grass roots
know what is right economically, do what is
accordingly right within the area of our own
economic and political activities, and then get and
stay forcefully articulate�in private and public�in
getting our representatives in government, unions,
and elsewhere to act with economic and political
horse-sense.
How
to Cure Health Care
By
Milton Friedman
Why Are Health Costs Rising? by Devon
Herrick
http://www.ncpa.org/pub/ba437
The Rise of Health Insurance
http://www.marketmed.org/history.asp
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