Tyler Cowen’s second health care fallacy is from one of my least favorite psuedo-economists Robert Reich,
Social Security is a tiny problem. Medicare is a terrible one, but the problem is not really Medicare; it’s quickly rising health-care costs.
You would think it is hard to resist the fiscal conservatives’ core argument — X is slated to grow a lot in cost, therefore we have at least one reason to spend less on X — but such resistance is becoming a growth industry.
There are two simple points in response. First, it matters whether a given expenditure shows up on the balance sheet of the government or not. It matters for the incentives of our government, for its credit rating, for future marginal rates of taxation, and ultimately for the future of the health care (or other) sector.
Second, if Medicare were less generous, much less would be spent on health care. Now you might think that would be a bad result and that of course a debate worth having. But the mere fact that you favor some amount of Medicare does not lower the cost burden of the amount you favor. If your preferred policy induces say “40 percent more of health care costs,” you can’t put all the blame on the preexisting level or path of health care costs. You also have to accept responsibility for the 40 percent boost or whatever the increment is.
I’ve long argued that Medicare is one of the reasons we have rapidly rising health care costs. It covers much of the elderly’s care and these are the people who tend to be the most intensive users of health care resources. Further, as new procedures and treatments become available the elderly avial themselves of them and we have demographics suggesting that costs are going to be rising–i.e. Medicare’s impact is probably going to be a growing one, not a shrinking one.
If you are going to reduce the growth rate of health care costs I think it is going to be damn hard to do it without making significant changes to Medicare.
