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Moore’s Law predicts that every two years the cost of computing will fall by half. That’s one reason why tomorrow’s gadgets may be better, and cheaper, too. But in American hospitals and doctors’ offices, a very different law seems to hold sway: Every 13 years, spending on U.S. healthcare doubles.
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Healthcare accounts for one in five dollars spent in the United States. It’s 17.9 percent of the gross domestic product, up from 4 percent in 1950. Technology has been the main driver of this spending: new drugs that cost more, new tests that find more diseases to treat, new surgical implants and techniques. “Computers make things better and cheaper,” says Jonathan Gruber, an economist at MIT who leads a healthcare group at the National Bureau of Economic Research. “In healthcare, new technology makes things better, but more expensive.”
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The main driver of exploding
The main driver of exploding health care costs is not technology but the abandonment of free market principles. In 1947 Congress passed the Taft-Hartley Act, which divided the market between tax-free employer-provided group plans and taxable individual policies. Since then, employee group members have gotten to use health benefits at the expense of their group. Left out in the cold are individuals, who have to pay the resulting inflated prices, and still have to pay taxes on their insurance plans--if they can afford them. The answer to exploding health care costs is eliminating the differential tax treatment of group and individual policies. Unfortunately, Obamacare takes us in exactly the wrong direction: extending the problem inherent in group plans to a single supergroup of 300 million people.
Technology by definition is a cost reducer. Hence the constantly-falling prices of better and better technology in the "technology" market.
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