A Bit of History
We begin with the most salient feature of health care economics in the United States: over the past three decades the total cost of health care has risen exponentially, and those who pay for it are urgently trying to control their expenditures. This economic upheaval is triggering profound changes in the financing and delivery of health care and, thereby, is precipitating the moral challenges that are the focus of this volume. To understand how all this has come about, we must first examine the explosion of expenditures and its causes.
Health care in the United States was not always the costly item it is today. Before World War II, health care was largely delivered in homes by family members.1 Physicians had relatively little to offer, save their conscientious attention and care. In 1929 health care represented only 3.5% of the Gross National Product (GNP), and even by 1950 this figure had risen to only 4.4%.2 Since that time, however, annual health care expenditures in the U.S. have grown to over half a trillion dollars, more than 11% of the GNP.3
The problem, however, is not that this or that dollar or GNP figure is spent. Rather, it is the steady rise in expenditures and increasing proportion of total budgets that frightens those who pay for care.4 Consider first the business community. When General Motors' Chairman Roger Smith announced in 1976 that GM was spending more on health benefits than on steel, the entire business community took note.5 By 1984 GM's total tab for employee health benefits had grown to $2.35 billion, or $5000 per active worker.6 That same year health benefits added$600 to the price of each Chrysler car.7 By 1986 Chrysler's figure had risen to $700 per car, nearly $6000 per employee.8 Though American auto workers in 1984 earned an hourly wage quite similar to that of their Japanese counterparts, the addition of fringe benefits—one of the largest of which is health care—rendered the difference substantial: $22/hr. in the U.S. versus $13.50/hr. in Japan.9