NCPA - National Center for Policy Analysis


October 19, 2004

The rise in health care expenditures is primarily due to consumers being systematically insulated from bearing the true costs, suggests Holman Jenkins Jr., writing in the Wall Street Journal.

Third-party entities, such as insurance companies and government, pay the bulk of health care costs, while consumers bear a relatively small share, thus encouraging them to spend more than they otherwise would, explains Jenkins.

Furthermore, hiding the cost of health care from consumers has gradually evolved over the last 60 years:

  • Beginning in the 1940s, the Internal Revenue Service allowed companies to pay their workers in untaxed health-care benefits; today, this subsidy provides high-end workers with a 40 percent discount on health insurance while low-end workers get nothing.
  • Medicare legislation created in the sixties has grown to the point where now the richest generation of seniors in history gets "free money" to spend on health care, with the funding being provided by younger workers.

Today, health care costs are being regulated in ways that make sense only because price tags have been generally removed. As a result, a significant portion of the economy's resources are being diverted wastefully to health care from other uses, says Jenkins.

Source: Holman W. Jenkins Jr., "Wanna Fix Health Care? Stop Hiding the Cost!" Wall Street Journal, October 13, 2004.

For WSJ text (subscription required),,SB109763231177243837,00.html


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