Government Can't Bend the Healthcare Cost Curve

There is no evidence government-run systems can cut costs.

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By Peter Roff, Thomas Jefferson Street blog

The proponents of healthcare reform claim costs will spiral out of control if the government fails to fundamentally change the nature of the American system. They are quick to point, for example, that the United States spends more per capita and more as a percentage of GDP on healthcare than any other nation. And that these expenditures are, for the most powerful economy in the world, somehow unsustainable unless something is done to, in the words of White House Office of Management and Budget Director Peter Orszag, "bend the cost curve."

President Obama said much the same thing in his joint address to Congress, in which he pledged he would not sign a healthcare bill that added to the deficit. Which is part of the reason—the other is to reduce the total advertised cost of healthcare reform—that Senate Democrats tried to move a piece of legislation that would freeze the automatic cuts in the reimbursements made to doctors and hospitals under Medicare. With that provision included, as I wrote Wednesday, a healthcare reform bill that also included what House Speaker Nancy Pelosi refers to as "a robust public option" would do to the spending and deficit targets what the iceberg did to the Titanic.

Those who argue the government needs to play a bigger role in the healthcare marketplace often point to Canada and Europe as examples of where single-payer systems and socialized medicine allegedly help to keep costs down. But, as the Republicans on the Joint Economic Committee explain, "the annual percent change in per capita health care costs in the U.S. has not been any higher than that of other developed nations that have primarily government-run health care systems."

In fact, say the JEC Republicans, "over the past decade U.S. growth has actually been lower than the average growth in all of the nations of the Organization for Economic Cooperation and Development (OECD)... Over the past decade and a half, the U.S. has done a better job of reining in healthcare costs than the average OECD nation."

There is no evidence to suggest that government-run systems have succeeding in bending the cost curve, except for savings that have been realized through rationing. To assume, as is being argued now here in the United States, that putting the government in charge of healthcare or increasing the role it plays in the healthcare marketplace will result in costs savings is to buy a pig in a poke.

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