Thursday , June 4 2020
Home / Scott Sumner /Is health care discretionary?

Is health care discretionary?

Summary:
Apparently so: The faltering doctors’ groups reflect part of a broader decline in health care alongside the nation’s economic downturn. As people put off medical appointments and everything from hip replacements to routine mammograms, health spending dropped an annualized rate of 18 percent in the first three months of the year, according to recent federal data. This is even more shocking than it seems.  The social distancing phenomenon did not even begin in America until well into March.  That means spending on health care probably fell by at least 50% in late March. I’ve long advocated a health care system where people make most purchases out of pocket.  For the poor, the government might subsidize the creation of health savings accounts.  Money not spent on

Topics:
Scott Sumner considers the following as important: , ,

This could be interesting, too:

Scott Sumner writes Herd immunity was never a feasible option

Bryan Caplan writes What I’m Doing

Scott Sumner writes A libertarian is a conservative who has been oppressed

Bryan Caplan writes What I’m Thinking

Apparently so:

The faltering doctors’ groups reflect part of a broader decline in health care alongside the nation’s economic downturn. As people put off medical appointments and everything from hip replacements to routine mammograms, health spending dropped an annualized rate of 18 percent in the first three months of the year, according to recent federal data.

This is even more shocking than it seems.  The social distancing phenomenon did not even begin in America until well into March.  That means spending on health care probably fell by at least 50% in late March.

I’ve long advocated a health care system where people make most purchases out of pocket.  For the poor, the government might subsidize the creation of health savings accounts.  Money not spent on health care could be used for other purposes.  Under this sort of system, health care spending would probably fall at least in half, perhaps much more.

Critics argue that health care is a necessity, not subject to the laws of supply and demand.  They mock people who suggest that buying health care is like purchasing a movie ticket or a snowmobile.

There’s no doubt that some types of health care are a necessity, say mending a broken leg or treating a heart attack victim. Presumably that sort of care continued during the lockdown. Based on the data from the first quarter, however, it seems as if much of health care is in fact discretionary spending.  There is every reason to believe that paying out of pocket would dramatically reduce health care spending from the current levels of nearly 18% of GDP.

Admittedly, some of this spending is merely postponed.  On the other hand, there would be much lower costs in a system where most payments are made out of pocket and the provision of health care is deregulated, as the public would be much more cost conscious.

Is health care discretionary?

Scott Sumner
Scott B. Sumner is Research Fellow at the Independent Institute, the Director of the Program on Monetary Policy at the Mercatus Center at George Mason University and an economist who teaches at Bentley University in Waltham, Massachusetts. His economics blog, The Money Illusion, popularized the idea of nominal GDP targeting, which says that the Fed should target nominal GDP—i.e., real GDP growth plus the rate of inflation—to better "induce the correct level of business investment". In May 2012, Chicago Fed President Charles L. Evans became the first sitting member of the Federal Open Market Committee (FOMC) to endorse the idea.

Leave a Reply

Your email address will not be published. Required fields are marked *