Better Red than Dead?

When medical expenses constituted only a small percentage of income, as was typically the case 50 years ago, an egalitarian approach to health care was a small extravagance. But, as societies spend ever-larger fractions of their income on health, support will become fragile.

Will the inexorable rise in medical costs around the world someday pose a major challenge to contemporary capitalism? I submit that in the not-so-distant future, moral, social, and political support for capitalism will be severely tested as would-be egalitarian health systems face ever-rising costs.

Rising incomes, population aging, and new technologies for extending and enhancing life, have caused health costs to rise 3.5% faster than overall income for many decades now in the United States. Some leading economists project that health expenditures, which already constitute 16% of the US economy, will rise to 30% of GDP by 2030, and perhaps approach 50% later in the century. Other rich and middle-income countries, although typically spending only half what the US does today, won’t lag far behind.

Countries in Europe and elsewhere have shielded their citizens from a part of this rise by piggybacking on US technological advances. Ultimately, though, they face the same upward cost pressures.

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