Many people believe that health care is a public good and a human right that requires government control or some form of single-payer such as Medicare for All. Health Care is definitely NOT a public good based on the economic definition. It is both excludable and rivalrous. You could make an argument that there are some positive externalities to health care, but they are very limited. You could make just as strong of an argument that some health care even has negative externalities.
Health care is not a binary good where you either get it or don’t. It is a collection of different goods and services where people may choose different levels of health care. Even if everyone wants health care, they place different values it. Given a choice, you might prefer more health care and a longer life expectancy while I might be willing to give up an extra year of old age in order to have more leisure today. Government shouldn’t make that decision for us.
Surveys may say that people place a high value on health care and it is a top priority, but obesity rates are the revealed preference that a lot of people don’t place a high priority on actual health.
Health care that cures people so that they can go back to work has positive externalities. Preventative health care, vaccines, weight loss, anti-smoking measures, and mental health provides benefits to the community at large. Other types of healthcare have no benefit to the overall community and a lot of it doesn’t even have private benefits. Healthcare that merely prolongs death does not.
I don’t want Grandma to die any more than you do and I’m not advocating some type of Logan’s Run euthanasia program, but Medicare can’t afford to continue spending vast amounts on health care with no public purpose. Yes, you paid into Medicare your entire life and expect to receive those benefits, but you only paid for basic health care. The cost of Medicare is 4-5x the amount paid into it through taxes and the problem is getting worse. It should be noted that these charts are inflation-adjusted.
Medicare cost $753 Billion in FY2022 and less than half came from Medicare taxes and premiums. That comprises 13% of the federal budget and is projected to consume 19% of the federal budget by 2052. Medicaid adds another $562 Billion.
Actual solutions to this crisis will be difficult. Cutting Medicare is a political non-starter, but it must be done. When I started writing Kinky Economics, the alternative name was The Barbed-Wire Safety Net. It will save you from falling, but it isn’t very comfortable. The same is true for health care reform and I will be covering some potential reforms in my next article.