Wall Street Journal: Rising Health Care Costs: Sign of Wealth, Not Cause for Worry?
Predicting that health care spending is likely to rise from roughly 15% of gross domestic product today to between 21% and 29%, Fogel argued: “As people get richer, they want to spend a larger share of their income on health.”
“Is that bad? Should such a development be arrested? Should government seek to thwart consumer demand for health care?” he asked. His answer: No! “Public policy ought not be aimed at depressing demand for health.”
He noted that Americans in 1875 spent 74% of the income of food, clothing, shelter and consumer durables. Today, thanks in part to rising incomes and rising productivity in the production of those necessities, such spending accounts for only 13% of American incomes. The result has been a rising share of income devoted to leisure — including working fewer hours than earlier generations did — and to health. Health care spending, which accounted for just 1% of consumers’ incomes in 1875, today accounts for about 9%, he said.
Pressure to restrain costs comes from employers and governments who pay the bill. The solution is to offer a universal package of basic-health care services and then require consumers to pay for additional servicesm — including private hospital rooms, shorter waiting times, expensive elective surgery, he said. “There are large luxury aspects to health care that are not necessary for basic health….Rich countries want a lot of convenience with their health care.”
He predicted that developed countries will move to private health-care accounts funded by forced savings, i.e. contributions that workers are required to make.
Fogel, 82, made the comments in a presentation at a conclave at Lindau, Germany, where a dozen Nobel Prize winning economists mingled with 300 young researchers from around the world.
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