Friday, May 9, 2008

Health care spending to decline?

Congressional hand-wringers warn us that unless we accede to more government control over health care, spending will go through the roof. They warn that the United States cannot afford to spend 16 percent of GDP on health care, and that this will spiral to 25 percent, unless we let them mange our health care economy.

Never mind that no one really knows how much health care we can afford, nor how the market will react when we hit that magic, but unknown ratio. What we all can agree upon is that a good deal of health care dollars are spent unwisely: Maybe that is changing.

One reason Americans spend so much on health care is that we can. Our total health spending eclipses the GDP of most every other nation. We are a wealthy people; and as our net spendable income increases, so does our spending on health care, only geometrically. The more net income we have, the more we spend on our own health.

Suppose, then, that certain economic developments decreased net spendable income. What if, for instance, gasoline, along with all other petroleum-based products, doubled in price? What if the cost of food increased 25 or 50 percent? Would we have more or less disposable income?

Given the increases in the everyday cost of living, it follows that most of us will have fewer discretionary dollars for plastic surgery, elective dentistry, health spas, chiropractic services, alternative (and often pricey) medicines or even name brand pharmaceuticals. When I say “most of us” I mean, of course, those of us who have some kind of connection with the first-dollar cost of health care.

On the other hand, those who receive health care from the government, and those with rich health plans, may just keep on spending like gluttons at an all-you-can-eat buffet. What better reason do we free market people need than to convince people that now is the time to go on a health insurance diet – that less is more, and HSAs along with high deductible health plans are the best option.

To have more discretionary income means spending less on those products and services that have lower cost options; another key selling point for high deductible health plans.

Overall, though, I think we might be in for a slowdown in national health spending. Politicians will ignore this, however, and continue to force increasing management burdens on providers, while strapping the public systems with an ever-increasing number of subsidized insured residents.

What do you think?