Milton Friedman on Medicine and health care
The high cost and inequitable character of our medical care system are the direct result of our steady movement toward reliance on third-party payment. A cure requires reversing course, reprivatizing medical care by eliminating most third-party payment, and restoring the role of insurance to providing protection against major medical catastrophes.
Context. From an article on why American spending on medical care rose so fast after World War II, which he traces to third-party payment: the tax exemption of employer-provided care and the enactment of Medicare and Medicaid in 1965. This opens his conclusion, which goes on to medical savings accounts and, as “a more radical reform,” catastrophic insurance for every family.
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Milton Friedman, “How to Cure Health Care” (Hoover Digest 2001 No. 3; a shorter version of his essay in The Public Interest, Winter 2001, 2001). https://miltonfriedman.org/quotes/cure-reprivatizing-medical-care-catastrophes-2001
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Employer financing of medical care has caused the term insurance to acquire a rather different meaning in medicine than in most other contexts. We generally rely on insurance to protect us against events that are highly unlikely to occur but that involve large losses if they do occur—major catastrophes, not minor, regularly recurring expenses. We insure our houses against loss from fire, not against the cost of having to cut the lawn. We insure our cars against liability to others or major damage, not against having to pay for gasoline. Yet in medicine, it has become common to rely on insurance to pay for regular medical examinations and often for prescriptions.
Context. From an article on why American spending on medical care rose so fast after World War II, which he traces to third-party payment: the tax exemption of employer-provided care and the enactment of Medicare and Medicaid in 1965.
How to Cure Health CareColumn, 2001, Hoover Digest 2001 No. 3; a shorter version of his essay in The Public Interest, Winter 2001Checked against the sourceRead the sourceEnactment of Medicare and Medicaid provided a direct subsidy for medical care. The cost grew much more rapidly than originally estimated—as the cost of any handout invariably does. Legislation cannot repeal the nonlegislated law of demand and supply: the lower the price, the greater the quantity demanded; at a zero price, the quantity demanded becomes infinite. Some method of rationing must be substituted for price, which invariably means administrative rationing.
Context. From an article on why American spending on medical care rose so fast after World War II, which he traces to third-party payment: the tax exemption of employer-provided care and the enactment of Medicare and Medicaid in 1965.
How to Cure Health CareColumn, 2001, Hoover Digest 2001 No. 3; a shorter version of his essay in The Public Interest, Winter 2001Checked against the sourceRead the sourceTwo simple observations are key to explaining both the high level of spending on medical care and the dissatisfaction with that spending. The first is that most payments to physicians or hospitals or other caregivers for medical care are made not by the patient but by a third party—an insurance company or employer or governmental body. The second is that nobody spends somebody else’s money as wisely or as frugally as he spends his own.
Context. From an article on why American spending on medical care rose so fast after World War II, which he traces to third-party payment: the tax exemption of employer-provided care and the enactment of Medicare and Medicaid in 1965.
How to Cure Health CareColumn, 2001, Hoover Digest 2001 No. 3; a shorter version of his essay in The Public Interest, Winter 2001Checked against the sourceRead the source
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