Health Care and Public Policy

Health Care and Public Policy

David Reisman

Health Care and Public Policy is a comprehensive and intelligible cross-disciplinary account of the objectives of health care policy (medical, social, economic) and of the policy-tools that government can employ (cost–benefit analysis, entry barriers, competition) in order to ensure that scarce resources are not wasted nor needy social groups deprived of basic and affordable care.

Chapter 10: Cost

David Reisman

Subjects: economics and finance, health policy and economics, politics and public policy, public policy, social policy and sociology, economics of social policy, health policy and economics


The share of medical care is rising. It is rising as a share of the national product, a share of government spending and a share of the household budget. The phenomenon is across-the-board. It is happening in all countries, developed and developing alike. The unit price times the quantity supplied tends to escalate. Medical care, in real terms, is costing more and more. In 1950 the average American spent only $500. Average expenditure, costof-living adjusted, has gone up considerably since then: ‘The average person in the United States uses nearly $5,000 in medical resources each year. That is more than the total spent on automobiles, TVs, and computers combined’ (Cutler, 2004: x). The consequence is as unattractive as families priced out of insurance and old people forced to economise on food. The rise is a problem for the typical family: $5000 is a large slice of the average income, approximately $35 000. It is also a problem for the health care policymakers. They want to see people get well. They also want to leave sufficient resources for the other good things in life. The concern is a general one. James Buchanan is speaking for many when he writes that the sorcerer’s apprentice is becoming a real danger to social balance: ‘In the United States, a large and ever-increasing share of total economic value is directed toward outlay on medical or health care services…. It becomes relatively easy to think of a share of one-quarter of the total value produced...

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