Left Business Observer makes the case that it was:
Little of this vast medical spending is done directly by individuals. To understand how this all works requires a brief detour into national income accounting.
Only about 40% of household spending on health care comes from paying the doctor directly out-of-pocket; most of the rest comes from paying insurance premiums (including Medicare). But it’s not just the premiums that individuals pay directly; the national income accountants also attribute the employer share of health insurance premiums to households. The logic of this is that fringe benefits are a substitute for wages and salaries, which take the form of medical care (or pension contributions). That may seem a little strange—it’s not income you can spend on rent or a prosciutto, arugula, and brie sandwich, but it is a form of compensation.
While the morality tale of American overconsumption isn’t supported by a close look at the data, that doesn’t mean that the rise in reported consumption and the collapse in reported savings (at least until very recently) is meaningless.
The few Wall Street analysts who’ve taken note of the medical contribution to the consumption spike have perversely been arguing that since there was almost no consumption bubble when you exclude medical care, the retrenchment in spending could be less severe and protracted than many expect. But that’s certainly not the story that the recent retail sales figures are telling: they collapsed in late 2008 and early 2009, and have continued to erode since. With labor income very weak and credit very tight, and with neither likely to stage a vigorous recovery anytime soon, the decision to retrench might not be freely made.
