by R. Passov
The economics of health insurance is of particular importance today. Health insurance has become a major issue of public policy. Some form of national health insurance is very likely to be enacted within the next few years. —Martin Feldstein 1
Fifty years ago, when healthcare expenditures were a mere 6% of US GDP, Martin Feldstein was afraid that the seemingly imminent adoption of some form of national health insurance would cause health care spending to grow unchecked.
Turns out, like many economists, he was half right. While a truly national health scheme is still in the making, health care spending is now 18% of GDP, and growing.
Feldstein, known to his friends as Marty, was an interesting guy. For outstanding contributions to economics by an economist under 40, he was awarded the Bates Medal. He was President Reagan’s chief economic advisor, a long-time teacher at his alma matter, Harvard, and managed to retain the presidency and CEO titles at the National Bureau of Economic Research (NBER) from 1977 until his passing in 2019. (He stepped aside from 1982 to 1984 to serve Reagan.)
The NBER describes itself as a private, non-profit research organization and then adds that it has been the source for most leaders of the Council of Economic Advisors. The Council is in fact a government entity, constituting the chief economic advisors to the Office of the President, while the National Bureau, which sounds like it is, is not.
Anyway, fifty years ago, Feldstein took his economics – the ‘markets solve everything’ kind – and reached the following conclusion: The problem with healthcare is Health Insurance. Eliminate insurance wrote Feldstein, and market forces would reign in the runaway price of health services. Read more »