Four Ways to Spend Money on Health Care

As the House gets ready to pass the health care bill today, I’m reminded of one of the first lessons in economics I ever learned. Milton Friedman put it best:

There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income.

The biggest problem with health care today is that patients only pay 12 percent of costs out of pocket.  As far as each individual is concerned, it’s basically on sale for 88 percent off! No wonder we spend so much on health care.

Today’s bill consists almost entirely of spending other peoples’ money on other people. If it becomes law, that 12 percent figure will fall even further. This is no way to keep costs under control. However noble Congress’ intentions may be, its bill will not work as advertised. Human nature won’t allow it.

One response to “Four Ways to Spend Money on Health Care

  1. Except that with government, as opposed to me the individual buying you Ryan something with your money, one has oversight (imperfect as it may be). Expenditure of those monies are a matter of public debate, governmental policy, and the law.

    I as an individual would obviously not be beholden to such restrictions on spending.

    Also, if the entire issue of public health (care) were this simple, we would not see public, socialized healthcare which rivals or exceeds our level of care, but we do (Sweden, Germany, Norway, Vermont).

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