The Real Problem With Health Care
Or one could say, the more serious problem with health care is the growth rate of health care expenditures. Projections for health care expenditures by Health and Human Services show health care spending growing at a rate exceeding 6% out to 2016. Keep in mind that GDP grows at about 3 – 4% each year. If this kind of growth holds steady long enough you have a growth path that is unsustainable. For example, consider an economy with a GDP of $100 and where health care expenditures are 16% of GDP (like it is right now in the U.S.) and you have an economy growing at 4% (a strong assumption in terms of economic growth) and you have only 6% growth for health care (a weak assumption). In 50 years time 40% of the GDP will go only to providing health care. In 100 years, 105% of GDP will go towards providing health care.
I find it funny that so many people are upset about something like global warming when by comparison the costs will be trivial. Clearly there will be a major crisis with regards to health care expenditures in well before we get to 105% of GDP. Also, this is why health care plans that actually are geared towards expanding access to health care, i.e. increasing demand, and with nothing to address the supply side of the issue are not only lacking in seriousness, but fool hardy as well.
However, the problem with the millions of uninsured is part of the problem in rising health care costs. When people who don’t have insurance and go to get care, even routine care, they typically go to the emergency room for such care. This is quite expensive. And even people with health benefits are frequently told to go to the emergency room with non-emergency health problems that they feel can’t wait for a day or so. So the idea that getting these people access to health care via some plan while helpful wont do all that much to reduce expenditures. Moving these people into Medicare isn’t a solution either since Medicare is already facing a massive shortfall.
So here we see a situation where fixing the problem with people lacking access to health care could actually exacerbate the underlying problem of health care expenditures. This is one of the major reasons why I don’t like Senator Clinton’s plan (or any candidate’s plan for that matter). There is damn little in her plan that addresses the issue of expenditures. Everybody wants to focus simply on the demand side. Make health care access universal, get uninsured kids insured (SCHIP), make minimal health care benefits mandatory (Sen. Clinton). At best we get lip service in addressing the supply side and even there it is of a dubious nature such as using the coercive power of the state to get a better deal on prescription drugs. Sounds good, but the long term effect is similar to price controls and will only reduce supply, not increase it. And when you reduce supply, increase demand, then prices go up even more.
Of course, doing something like breaking the barriers to entry to the medical profession that are advocated by the AMA and enforced by the government…why that is just crazy talk. There is a shortage of nurses in this country, so much so now companies are bringing nurses from overseas (link). With regards to doctors, the U.S. is producing about 1 doctor for every doctor that retires, and this has been the case since about 1985 (link). And in the not too distant future lots of doctors are going to be retiring with the baby boomers…a time when we’ll need even more doctors. And keep in mind that the number of doctors is a political decision, not one made by the market place. The supply side of the problem is a major part of the problem that needs to be addressed and which is all too routinely ignored.