Thursday, July 12, 2007

How We Came to Spend so Much

In his response to my recent posting about the central dilemma of health care reform, John Kelly asked if I had some thoughts on how the USA came to spend so much on health care. He quoted a Chicago Tribune interview that blamed commercialization.

I attribute the high level of expenditure to a combination of factors. They are

(a) Our ability to afford it, thanks to a large and growing economy.
(b) The high position occupied by health care in our society’s hierarchy of values.
(c) A lack of recognition that an important social service could be overfunded. It had never happened before.
(d) A perception of health care as a ministry not to be profaned by the vulgarity of market competition.
(e) An “onward and upward” culture that considered growth to be a virtue.
(f) A health care system led by imaginative, energetic, and ambitious people able to find justifiable ways to spend money faster than the additional income needed to support them could be generated.
(g) A pluralistic system of financing that allowed the health care system to tap into multiple sources of money.

In the years following World War II, the United States was the only country with a private economy strong enough to support health care at a socially acceptable level. Health insurance played an important role in that monthly prepayment was a way to get the well to pay for the care of the sick. Before insurance, charity and the sick themselves were the only sources of revenue.

By the early 1960’s it became apparent that private health insurance was not going to work for the elderly or the poor. So we got the Social Security Amendments of 1965 which created Medicare and Medicaid.

With the enactment of those programs, the health care system had access to revenue from government (mainly federal), from private corporations (tax deductible health care benefits), from tax deductible private donations, and from individuals; i.e., from every important segment of the economy.

So there was a fertile field in which the mutually reinforcing factors listed above could operate and, as they say, the rest is history.

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