Thursday, May 04, 2017

Government intervention dramatically increases the cost of medical care

1995: “Medicare provides a good example. It was created in 1965 to make it easier for the elderly to get health care. But by reducing the patient’s out-of-pocket costs, it increased the demand for doctors and hospitals. And it reduced the supply of those services by requiring doctors and other medical personnel to use their time and attention handling paperwork and complying with regulations — and looking for ways to circumvent these things. So the price of medical care rose sharply as the demand soared and the supply diminished. As a result, the elderly now pay from their own pockets over twice as much for health care (after adjusting for inflation) than they did before Medicare began. And most older people now find it harder to get adequate medical service. Naturally, the government points to the higher costs and shortages as proof that the elderly would be lost without Medicare — and that government should be even more deeply involved.4 When Medicare was set up in 1965, the politicians projected its cost in 1990 to be $3 billion — which is equivalent to $12 billion when adjusted for inflation to 1990 dollars. The actual cost in 1990 was $98 billion — eight times as much.”

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