NCPA - National Center for Policy Analysis

Health Is the Health Of The State

July 25, 2011

The country is currently engaged in a pitched battle over the size of government and the fierce struggle over the debt ceiling is a skirmish in this much larger war.  Health spending is central to this debate.  But many Americans may not realize the degree to which health care has dominated the growth of government over time, says Christopher J. Conover, an adjunct scholar at American Enterprise Institute.

  • Between 1966 and 2007, the entire increase in the size of government relative to the economy resulted from growth in tax-financed health spending.
  • As a share of GDP, publicly financed health spending in 2007 was five times as large as it was in 1965 (the year immediately before Medicare and Medicaid began).
  • In contrast, the share of the economy attributable to government spending on all other activities unrelated to health was identical in 1966 and 2007.
  • When 2007 is compared to 1966, the entire amount of the increase in the size of government between those years was accounted for by rising public expenditures on healthcare.
  • Much of this, of course, was related to the rapid growth in Medicare and Medicaid spending.

The rise in government-funded healthcare has been extraordinary by any measure.  In terms of constant purchasing power for everyday goods, tax-financed healthcare has increased 30-fold just since 1960. This includes all federal, state, and local government spending for healthcare, such as public health, direct delivery of health services, public health insurance, and investments in medical R&D and facilities construction, says Conover.

Source:  Christopher J. Conover, "Health Is the Health of the State," The American Enterprise Institute, July 19, 2011

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