The Health Care Industry: Protectionism the Free Traders Love

The Health Care Industry: Protectionism the Free Traders Love

Suppose that people in the United States paid twice as much for our cars as people in Canada, Germany, and every other wealthy country. Economists would no doubt be pointing out the enormous amount of waste in the US auto industry. They would insist that we both take advantage of the lower cost cars available elsewhere and take steps to make our own industry more efficient.

For some reason, economists do not have the same attitude towards health care. Most seem little bothered by the fact that we spend more than twice as much per person as people in other countries, with no obvious benefit in terms of health care outcomes. This lack of concern is especially striking since health care is a far larger share of the US economy than autos, comprising 17 percent of total output, as compared to about 3 percent for autos.

The excess health care spending comes to more than $1.2 trillion a year or the equivalent of more than $16,000 for a family of four. Paying too much for health care has the same economic impact as a health care tax. In effect, we have a health care waste tax that is about 10 percent larger than the projected federal revenue from the personal and corporate income tax combined. In short, this is real money.

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