Tuesday, March 26, 2013

The Health Care Cost Crisis

Policy wonks around the country agree that the U.S. has a serious health care cost crisis.

As Peter Orzag notes, Medicare currently takes up about 3.8% of GDP and that proportion could rise to 6.8% by later this century. But Medicaid costs are also increasingly rapidly as are private sector so total health care expenditures currently take up 17% of GDP and could rise to 30% of GDP by 2040.

But first, you might be wondering why I'm only talking about the problems with spending money on health care. It is because the fact that fewer people are dying because of all of this money invested in health care is something we can safely ignore. When every other industries grow, like the cell phone industry or the automobile industry, we celebrate all the "job creation" and value the higher quality of new products. In fact, that is why we those industries grow: people like their products so much they spend more and more money on them. But health care is different for reasons I can't explain.

The chart below should the historical pattern from 1945 to 1995 as more of our resources were dedicate to healing the sick.

As you can easily extrapolate why out of sample, health care could easily take up 0.3% of GDP by 2040. Wait . . . that can't be right. Oh, sorry, this is a graph of movie ticket sales as a percentage of GDP. And since it ignores DVD, VHS, and streaming video sales and rentals, obviously it understates the percentage of GDP we are dedicating to movies and entertainment.

I think I just diagnosed America's movie cost crisis.

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