Out of Control Policy Blog

Health Care Reforms Ignore Fact Government is the Problem

A report released this week by Arthur Laffer and several associates spotlights a crucial problem with current health-care reform plans: the divert more resources into unproductive government activity.

All the reforms currently debated in Washington assume that the government can spend health care dollars as efficiently and even more efficiently than the private sector. This is simply contrary to empirical evidence that shows that public spending is less productive than private spending.

Laffer et al show empirically what happens when the "wedge"--the difference between public and private spending--widens and gives government the upper hand. More specifically, they find:

Specifically, the planned $1 trillion increase in federal government health subsidies over 10 years based on President
Obama’s principles will have the following consequences:
• Overall, total federal government expenditures will be 5.6 percent higher than otherwise by 2019, adding $285.6 billion to the federal deficit in 2019.
• An increase in national health care expenditures by an additional 8.9 percent by 2019.
• An increase in medical price inflation by 5.2 percent above what it would have been otherwise by 2019.
• A reduction in U.S. economic growth in 2019 compared to the baseline scenario by 4.9 percent for the nation as a whole.

The Texas Public Policy Foundation has provided a convenient fact sheet summarizing the main findings of the report.

Samuel Staley is Research Fellow

« Massachusetts Health Care Flop and… | Main | Critiquing Transit and the Job… »

Comments to "Health Care Reforms Ignore Fact Government is the Problem":

LimmaA | August 9, 2009, 12:36am | #

Thanks for the nice update.Aside from that breaking report let me share something new issue to you.Some people might be hearing the name Diandra Douglas lately, and might wonder if she has anything to do with Michael Douglas, the actor. She does – Diandra Douglas is his ex-wife, and together they had one child, Cameron Douglas. The two married in 1978, divorced in 2000 – conveniently right before he married Catherine Zeta Jones. Why is she in the news? Well, it's because Cameron Douglas did not pursue a career in acting, instead opting to get busted for being a dealer of methamphetamines. (You might call it a Felon Attraction!) The bust was for a large ring operation, so it might take a cash advance for a good lawyer to keep Michael and Diandra Douglas son out of jail.

Out of Control Policy Archives