DECEMBER 17, 2013
“Those who cannot remember the past are condemned to repeat it,” declared philosopher George Santayana. The U.S. “health care cost crisis” didn’t start until 1965. The government increased demand with the passage of Medicare and Medicaid while restricting the supply of doctors and hospitals. Health care prices responded at twice the rate of inflation (Figure 1). Now, the U.S. is repeating the same mistakes with the unveiling of Obamacare (a.k.a. “Medicare and Medicaid for the middle class”).
Figure 1: An Indexed Comparison of Health Care Inflation and Consumer Price Index in US from 1935 to 2009 (Source: US Census 2013) Nobel Prize-winning economist Milton Friedman wrote that medical price inflation since 1965 has been caused by the rising demand for health-care coupled with restricted supply (Friedman 1992).