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February 24, 2005

The Health Care Funding Crisis Is a Health Care Opportunity

Bradford Plumer makes an important point: the coming funding crisis in Medicare and Medicaid is not a crisis, but an opportunity: not a bad thing, but a good thing:

Bradford Plumer: Reading [Robert] Samuelson's op-ed in the Post reminds me that much of the hand-wringing over escalating health care costs is rather silly. Health care costs, of course, aren't rising because of some insidious inflation mechanism that's making all our favorite treatments magically become more expensive. Nor are they really rising because we're aging as a population—that's a part of it, but only a small part. No, health care costs are rising primarily because new and new treatments are coming to the market, and people are choosing to spend a lot of money on them.

The way things are going, in the future people are going to be choosing to spend X percent of their income on health care. X will get larger and larger over time, by choice. So let's say X is 40 percent. From one standpoint, it really doesn't make a difference whether you pay 40 percent of your income for private health care, or 40 percent of your income in taxes that then go to government-administered health care. I mean, yes, in one sense it makes a difference: If you think the free market is a better way of delivering health care, you'll endorse option 1; otherwise, you'll endorse option 2. But in the end, you're still paying 40 percent of your income. We're in no sense 'controlling health care costs' by slashing programs like Medicare and letting people pay out-of-pocket. Now you could say that this is an imperfect point, and it is. I could argue that I shouldn't, for instance, have to pay 40 percent of my income for some retiree's health care now, when I'm still a healthy young buck, even though I would willingly pay 40 percent of my income later on for my own personal health care—be it via Medicare or private insurance. Fine. Then the appropriate thing to do is start pre-funding a health care system for our retirement. Still, there are lot of ways in which it's disingenuous to say, 'Oh no! America's doomed! We're going to have to raise taxes massively in the future in order to afford things we'd be spending a good chunk of our income on anyway!'

There are big important issues lurking out there in this. First, how skewed by class is medical care going to be in half a century--will new technologies be available to all (and paid for by public programs) or thus to the relatively rich? Second, are there things that could be done that could make the medical system more cost effective--and by "cost effective" I don't mean "cheaper because it treats fewer people in a necessary and appropriate way"?

But on the first-order point, Brad is absolutely right. (I like the way that sentence sounds: I wish *I* heard it more often from others.)

Posted by DeLong at February 24, 2005 01:51 PM