Friday, July 20, 2007

Medicare/Medicaid driving Health Cost explosion

Just as State Lotteries have driven up the cost of Higher Education. Medicare/Medicaid is the major driver of heathcare costs says an MIT Prof. Government solutions always involve politicians showing us how much they care by dumping OUR money on favored groups. This almost always involves a huge misallocation of resources.


It comes from Lyndon B Johnson's Great Society and the introduction of Medicare/Medicaid in 1965. At the time, health care spending in the US was a mere 5% of GDP. Today it has exploded to a staggering 16.5% of GDP. An economics professor named Amy Finkelstein from MIT has shown what happened after the implementation of the new state health insurance. She concluded that it is not, as conventional wisdom has it, ageing populations and medical progress, but rather the expansion of the insurance industry itself that is the the real driver of healthcare costs. Her views stirred up the thinking about health care spending since first published last year.