Jonah Goldberg calls it ‘expense account health care’ because people treat it as such. If you had an unlimited expense account for lunches that your boss (in this case the insurance companies) just about always rubber-stamped, you’ll eat a lot more than if you paid yourself.
Mark Perry at AEI’s blog has a great couple of graphs, here’s one:
But the chart above (data here) shows what might be the two most important reasons for rising healthcare costs over the last 50 years: a) declining out-of-pocket payments for medical expenses, which have fallen from 47 percent of total health spending in 1960 to a record low of only 11.9 percent in 2008, and b) expanding public funding of healthcare, which reached a record high of 47.3 percent in 2008. There’s now been a complete reversal—whereas consumers paid 47 percent of total medical costs in 1960, it’s now the government paying 47 percent of health spending, while consumers pay less than 12 percent out of pocket for healthcare. That reversal is a guaranteed prescription for rising healthcare expenditures.
As consumers have relied more and more on employer-provided healthcare and government programs such as Medicare and Medicaid, they have become less and less conscious of healthcare costs because they have been increasingly spending somebody else’s money, and not their own. Just imagine what would happen over time to the cost of food, clothing, or automobiles if consumers paid only 12 percent of the total bill, with the other 88 percent paid by employers or the government, and it’s easy to understand why healthcare spending goes up year after year.