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America’s Healthcare Crisis is Partly the Fault of the Global Price Controls [1]

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Date: 2025-01-14

The aftermath of Luigi Mangione’s killing of UnitedHealth Group Inc.’s insurance unit chief Brian Thompson, continues to inspire rage against the healthcare costs Americans face. At the JPMorgan Healthcare Conference, the pharmaceutical industry’s biggest investment conference, held in San Francisco this year between the 13th and the 16th of this month, drew protesters yesterday, with signs reading, “delay, deny, depose” , the very words that prosecutors allege marked out the shell casings that were found at the scene of Thompson’s killing last December. As attendees arrived at the Westin St. Francis, around two dozen protesters shouted, “health care is a human right”, and accused the pharmaceutical industry of working with insurers to drive up healthcare costs. Unfortunately, the tragedy of the taking of a human life has been overshadowed by the healthcare crisis that Americans face, and as a result, Langione has become a kind of cult hero. This is a questionable conclusion but it does highlight how emotive healthcare has become and just how desperate so many Americans are. If healthcare is a human right, it is one that many Americans feel they do not have access to. Yet, as I will argue, the idea that we should be more like Canada or Europe misses a significant economic fact: the United States is effectively subsidizing innovation for Canada and Europe.

Yes, Costs Are Exploding

The trouble with Mangione's diagnosis of the problem, is that it assumes that the fault of the crisis lies with particular CEOs and industry actors. This is naive. In 2022, the last year for which the Peterson-KFF Health System Tracker has data, the average American spent $1,425 out of pocket, compared to a comparable country average of $904. Not only do Americans spend more on healthcare than most people in comparable countries, they do so for comparable levels of care. In other words, A British person who spends $764 a year on healthcare costs, is getting a comparable level of care as an American who spends $1,425.

In total, in 2023, the United States spent $4.87 trillion on healthcare in 2023, according to KFF, or $14,570 a person. It’s hard to figure out exactly how much Americans spend per household. For example, according to the Health Care Cost Institute, the average person with employee-sponsored insurance spent $6,710 in 2022 . In 2024, the average family paid a health insurance premium of $25,572 , with contributions from both the employer and the family. Premiums have grown by half since 2014. Only a small portion of premiums are directly paid by employees. Most of that is paid by employees. In other words, premiums represent lost wages. Your employer could pay you $x a year, but because of the nature of our health care system, $y is deducted and paid out for your premiums. This is true even for people who work in the healthcare or insurance industry. Not only is your employer having to divert your wages toward healthcare premiums, they are having to do this at higher rates. Since 2000, healthcare spending has more than doubled, after inflation, from $2.2 trillion to $4.9 trillion, and the average person’s spending has followed suit, from $7,908 in 2000 to $14,570 in 2023. Few people can say that their wages have doubled since 2000. In terms of the economic activity of the country, measured by gross domestic product (GDP), spending has gone from 7% of GDP in 1970 to 18% in 2023. In terms of household budgets, healthcare spending has jumped from 5.4% of household budgets to 8.2%. One solution for this has been to have “high-deductibles’ insurance plans, in which, basically, people pay lower premiums and gamble that they will not be often sick or get so sick that when they have to pay out-of-pocket, it won’t annihilate their budget.

America Bears the Global Burden of Innovation

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