The Health Spending Myth

The runaway healthcare spending myth is a great example of how the free market works when the consumer responds to the economic factors that are presented to him. Healthcare spending was spiraling at significant rates in the late 90’s and reached a peak in 2002. Most people believed that it was the only industry that violated the supply/demand theory and rationalized that since most consumers had health insurance provided by their employer, who paid the lion’s share of the premium, rising prices had no effect on demand. Also, there was no real competition in the classical sense since results were measured in near term rather than long term outcomes.

Finally, the free market kicked-in when employers realized the growing impact of this cost on their bottom line. They started to increase the employee’s portion of the premium, they offered consumer-oriented health plan options to employees,and the concept of health savings plans started to become more popular with younger and healthier people who opted for high deductable plans with lower premiums. Prevention became the health motto as holistic and integrative medicine became more popular. The golden age of wonder drugs in the 80’s and 90’s was giving way to generic alternatives as patents expired and these medications became more affordable and available over-the-counter.

We were seeing the transfer of economic responsibility for healthcare evolve from corporate and government bureaucrats to the consumer – and sure enough healthcare is starting to resemble the free market where the consumer dictates price, competition, and value. As the illustration shows healthcare spending is now growing at a rate that resembles the inflation rate. This refutes the claim we hear from this Administration that we now need Obamacare or national healthcare “to stop this out-of-control healthcare system”. In fact, that data show that costs will actually climb as a result of Obamacare, care will be worse (particularly for the elderly), and the consumer will lose control of his healthcare destiny.

The fact of the matter is the price of food, gasoline, and the basic staples is what’s skyrocketing with this inept blend of academics and inexperienced bureaucrats who never read a profit-and-loss statement or even worked for a living, are now calling the shots. Instead, this President spends $1.0 trillion on his convoluted healthcare plan, and steals $500 billion from Medicare to pay for it which puts us in the hands of commissions and panels to decide the care we get.

I’m not implying that our healthcare system is fixed, we certainly need reform, but the fact is that this decade-long trend line shows us the way toward good policy decisions in the future. If we can uncouple health insurance from employment, allow the consumer to purchase his own mix of coverage in a competitive market across state lines, we will accelerate this evolution in healthcare costs and make it a system that provides affordable care for all segments of our society.