I am concerned about the impact of health costs on the larger economy. Health care today as a sector is as large as the entire Federal Government. There is no effective market mechanism to retrain the continuing growth health care. There is no effective competition at the level of insurance companies. On the consumer level, no-one goes comparison shopping when he is sick. Hence there is no market and no market restraint on costs.
Health care has grown largely because it has been able to offer a more effective product. The machine treating my cancer costs $4 million. Operating costs are about $2 thousand an hour. Before long there will be a better machine, costing $10 million. My hospital will be required to buy it. Health care today represents the absolutely best arena for research, technology and investment. It is unquestionably the best sector for guaranteed returns.
Consequently, we can expect health care to grow as a percentage of the GDP. Within three years at the present rate health care will consume 25% of the GDP. There is no mechanism to arrest the growth. Consumers naturally want the best care. Medicine is happy to provide the best care. Insurance companies are happy to collaborate. Absent some intervention, we can easily imagine health care consuming 40 or even 50% of the GDP.
Here is my major concern: As the health care sector absorbs a larger proportion of the national income, there is proportionally less for the rest of the economy. I suspect that the flow of money through the health care sector is "sticky", retarding re-entry into the rest of the system. In effect, feeding health care starves the rest. The dollars spent on health care won't be spent at Home Depot or the Chevy lot.
My economics come from memories of undergraduate courses on Mill and Ricardo. All welcome to set me straight.