NCPA - National Center for Policy Analysis


March 29, 2005

The next great battle between socialism and capitalism will be waged over human health and life expectancy. With the health sector on tract to make up almost a third of economic activity later this century, the issue becomes precisely how much redistribution of income and government intervention is warranted, says Foreign Policy's economic columnist, Kenneth Rogoff.

During the next few decades, modern societies will wrestle with very tough questions and tradeoffs like determining people's basic health needs in an era of relentless medical advances and trying to help people while giving them incentive to economize on their use of scarce health care resources, explains Rogoff:

  • U.S. health care costs have reached 15 percent of annual national income and could exceed 30 percent by the middle of this century. Other industrialized nations are not far behind.
  • When health costs reach 25 percent of national income, Americans could see their tax bills more than double, while total taxes could reach 75 percent of many Europeans' income.
  • If the United States joins other nations in having more socialized medicine, the current pace of technology improvements might well grind to a halt.

While part of the rise in American health care costs stems from the breakdown of checks and balances that a more centralized systems provides, Rogoff does not recommend emulating the monopolies over health care held by the British and Canadian governments. Those countries are increasingly facing the need to allow a greater play of market forces.

Today, the whole world benefits freely from advances in health technology that are driven largely by the allure of the profitably U.S. market, says Rogoff.

Ultimately, the case for some government intervention and regulation in health care is compelling on the grounds of efficiency (because costs are out of control) and moral justice (because our societies rightly take more egalitarian views of health than of material possessions), says Rogoff.

Source: Kenneth Rogoff, "A Prescription for Marxism," Foreign Policy, January/February 2005.

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