Dr. Art Laffer, a member of President Reagan’s Economic Policy Advisory Board for both of his two terms, recently released a report entitled, “The Prognosis For National Health Insurance.”
The report goes a long way in debunking the supposed cost-savings of the current health care legislation making its way through Congress so often touted by the Obama administration.
From the Executive summary of the report:
In 1960, the private sector funded over three-quarters of the nation’s health care expenditures. Individuals paid nearly one-half of the total national health care expenditures through out-of-pocket expenditures. Beginning in 1967 the way health care is purchased in the U.S. began to completely reverse itself:
- The private sector has been slowly funding less and less of the total national health expenditures; as of 2007 less than 54 percent of total national health care expenditures are paid for by the private sector.
- Reciprocally, the public sector has been slowly funding more and more of the total national health expenditures; as of 2007 public expenditures at the federal and state levels now fund nearly one-half of the total health care expenditures in the U.S.
- Total out-of-pocket expenditures have been plummeting as a share of total health expenditures at an even faster rate; today only a bit more than $1 out of every $10 spent on health care is being funded by individuals through out-of-pocket expenditures.
This has resulted in a large and growing government health care wedge — an economic separation of effort from reward, of consumers (patients) from producers (health care providers), caused by government policies. Rising government expenditures on health care are the main factor driving the growth in the wedge. The wedge is a primary driver in rising health care costs, i.e., inflation in medical costs.
President Barack Obama's principles to drastically alter U.S. health care policy-a public health insurance exchange, mandated minimum coverage, mandated coverage of preexisting conditions, required purchase of health insurance-do not address the growing wedge and its role as the fundamental driver of health care costs. In fact, they will further increase the wedge, and can thus be expected to increase medical price inflation.
