How much should we spend on health care?

A couple of interesting blog post on regarding the Familes USA report on the burden of health care cost (get the PA report here, and the PA news release here)

My comments in this Evening Bulletin story did not address the report’s findings, but the best way to reduce costs (i.e. competition in health care) , which the report does not address, although Families USA generally supports more government-financed health insurance/care.

In contrast, Sarah Brodsky argues that Familes USA is mistaken to argue that 10% of income is too high to spend on health care, or that increased spending on health care is necessarily a problem. Her argument is that health care spending is not the same as health care prices – i.e. we are buying more health care than ever. Prices of individual services and procedures have declined, and more people are buying more of it (and of new procedures being developed). Greg Mankiw made a similar point in a NY Times column a few weeks ago – as we get older and richer, we are buying more health care services.

Linda Gorman follows-up a breakdown of all several categories of spending – including health care – as a proportion of consumption over several decades.

Both comments note that cost of taxes dwarfs that of health care. In fact, Michael Cannon points out that the taxes on a typical family of four for government health insurance (Medicare and Medicaid mainly) exceeds the cost of their own insurance.

In 2007, the average family of four will pay $25,000 for health insurance — nearly 30 percent of their income. About $14,000 represents taxes that fund health programs for the elderly and the poor. In other words, the government controls the lion’s share.

The remaining $11,000 purchases the family’s own coverage, usually through an employer. Though we count that as “private” spending, the government largely controls that $11,000 as well.