Why Are Costs Out of Control?
Basically, this book is not about cost and price but about values. Nevertheless, the choices between values that confront us when discussing health care would not have to be made were it not for the high and rising cost of that care. In 1960 the nation devoted 5.3 percent of its gross national product (GNP) to health care. Three decades later, in 1990, it spent 12.2 percent of a GNP that had more than doubled in the meantime. By 1993, the share rose to 14 percent. Our real expenditures on medical care have quadrupled. Even allowing for population growth, per capita real expenditures for health care have nearly tripled.
No one would claim that we are receiving four times, or even three times, as much health care as we did in 1960. There have been some gains: substantial increases in longevity for those over age sixty-five, lower infant mortality, and a more equitable distribution of medical care. Since 1965, most of the poor have gained better access to medical care, as indicated (inadequately) by number of visits to doctors' offices. Could these gains not have been achieved without more than doubling the share of income going to medical care?
First, let us look at the big picture: the large increases in health care spending, the inflation in prices. (In Chapter 3 we look briefly at future projections under the current system and the implications for economic growth and living standards.) Second, we examine briefly in this chapter the particular causes of mushrooming medical costs and their interrelations.
The growing share of GNP devoted to medical care is presented in Figure 2.1. These estimates are on the low side; they are not comprehensive. They do not include much of the expenditures on public health. They exclude some research and development costs, which will contribute in the future to improved public health. Where does one draw the line? Expendi-