Sunday, January 17, 2010

consumption spending and health care

Here is a follow-up article (via marginalrevolution) to a post I made about a week ago on the private share of social spending and its relationship to market-based welfare in the U.S. (By the way, that post has three updates now so check back to see some more discussion from Mankiw and Krugman on the issue!) Left Business Observer examines another component of GDP -- consumption -- and asks to what extent our consumer economy is also dominated by health care expenditures.

Here is a good quote to ponder:
While the consumption spike may look like the result of an accounting convention, it’s also reflecting a sad reality: an enormous, and ever-increasing share of our national income is going to health care. Of course, some unquantifiable share of that spending makes people healthier, happier, and more productive. But much of it doesn’t. In economic jargon, it’s a deadweight loss. As the graph above shows, the U.S. devotes a far larger share of its national income to health care than any other country: 37% more than the second-biggest spender, France; 49% more than Canada; 68% more than Sweden; 87% more than the UK. Yet U.S. health indicators are consistently among the worst in the OECD, with terrible ratings on life expectancy, infant mortality, obesity, and mental health. U.S. readings on all these are worse than countries spending far less on health care.


  1. My perception (although I can't back it up empirically) is that health care costs in the US are so high because people without insurance cannot be refused treatment. Thus providers jack up costs on everything else to cover these losses. I am obviously not blaming the uninsured, but rather a system without universal coverage. Correct me if I am wrong.

  2. That's interesting, I never heard that argument before. Forgive my ignorance but is this a Federal law or something which says patients can't be refused treatment? It makes sense though since such a system ties providers' hands with laws at the same time that it forces them to be competitive.

    Of course, other arguments for rising healthcare costs include the rise in malpractice suits. Is there some analogy between the two arguments?

    Just thinking out loud, because I don't know much about the issue. Anyone else?