Saturday, March 07, 2015

Will Obamacare cut costs?

According to The Economist, "The growth in America’s health-care spending is slowing". The graph on the left suggests that not only is the growth slowing, but costs are actually going down. Of course, that graph also shows that the USA spends a higher percent of GDP on health care than do European countries with socialized medicine. Those countries also tend to have longer life expectancy than does the USA.

Of course, if the Republicans succeed in gutting the Affordable Care Act, the trend may stop at that point. The graph indicates that several times in the past the portion of GDP dedicated to health care held steady for a few years, only to take off again.

I think the problem has been that programs were started to increase demand for health care -- Medicare, Medicaid, public drug cost financing within these services -- without complementary programs to increase supply of services and still more important, to control costs. The law of supply and demand tends to increase costs when demand increases and supply does not. Of course, consumers do not really prescribe their treatments, the doctors do and then bill accordingly. Moreover, new medical technology seems always to provide useful alternatives but to increase costs.

No comments: