Spin - Free Economics by Nariman Behravesh

Author:Nariman Behravesh
Language: eng
Format: epub
Publisher: McGraw-Hill
Published: 2009-07-14T16:00:00+00:00

Don’t Confuse Universal Coverage with a Comprehensive Solution to Health-Care Problems

The health-care market is the prototypical example of market failure. Unfortunately, few countries have come up with a satisfactory solution. At one extreme, the government-run health-care systems of the United Kingdom and Canada provide a minimum level of care for everyone, but impose long waits for anything other than life-threatening conditions (except for people who can afford private care). At the other extreme, the mostly privately funded U.S. system provides some of the best health care for those who can afford it, is the most expensive in the world, and leaves tens of millions uninsured. The “optimal” solution is somewhere between these two systems, with both the public and the private sectors playing an important role.

Before considering why the U.S. health-care system is broken and some ways to fix it, a more detailed look at the data will reveal a few surprises.

U.S. spending on health care: more (and less) than that in other rich countries. In 2005, the United States spent more than 15 percent of GDP on health care. On average, rich countries spend only 9 percent of their GDP on health care. Nevertheless, only 45 percent of U.S. funding is provided by government (mostly for Medicare and Medicaid), compared with around 73 percent in most other developed nations. As a share of GDP, public funding for health care in most European countries and Japan is much higher than in the United States. Out-of-pocket spending by the typical household is also lower in the United States. Moreover, between 1995 and 2005, per capita health-care spending in the United States grew by 3.6 percent (although it has risen more rapidly in the past few years, especially public spending), below the 4.0 percent average growth rate for all developed economies. Finally, these costs do not include the hidden costs of waiting that plague other health-care systems, especially those in Britain and Canada. The cost of health care will continue to increase everywhere in the next couple of decades as populations age and as good health becomes ever more valuable to older and wealthier people. The bottom line: American health-care spending will continue to rise, but it

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