Sen. Sam Brownback’s Senate Republican branch of the Joint Economic Committee has released an interesting study on public health care expenditures. According to the JEC study, health care programs from Medicare, to the Massachusetts reforms, to Britain’s NHS have consistently cost more than originally predicted. Total Medicare expenditures in 1990, for example, were 10 times greater than originally predicted. The report explains why reality often overshadows estimates:
In some of the above cases—such as the British NHS, the U.S. ESRD entitlement, and the Massachusetts health care reform—initial public estimates appear to have simply underestimated the level of demand for the proposed new benefits, perhaps due to insufficient data or a lack of experience administering benefits of that sort. In other cases, such as Medicare’s creation, the actuaries could not have been expected to factor in future program expansions not actually authorized in the then-pending legislation.
New welfare programs create their own demand, both by reducing the marginal incentives of work and increasing the consumption of those receiving the entitlement. It’s hard to guess how much “free stuff” people will want, but it’s never surprising that they want a lot of it.
As breakthrough new medical techniques and drugs are developed, demand increases. This means more health care consumed at higher prices – often the high patent prices of new drugs. The growth of medical knowledge often exceeds less dynamic bureaucratic predictions. The health care entitlements being advanced by Congress Democrats may force us to choose between foregoing this innovation and facing a budgetary meltdown.