Milton Friedman on Medicine and health care
Enactment 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.
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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/medicare-cannot-repeal-law-of-demand-rationing-2001
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He also said
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.
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 sourceI do not believe there is any case whatsoever for government’s financing ordinary medical care of a private patient. The cost of financing ordinary medical care is well within the means of ordinary families in most of our countries. Certainly so far as the more expensive, unusual forms of medical care the appropriate method of financing those is insurance just as that is the appropriate mechanism for financing other large risks.
Context. From a talk to physicians, published in Private Practice in July 1981, on the trend toward government control of medicine and the prospects for reversing it. Directly after allowing a role for government in helping people in dire distress. He goes on to say that insurance is the appropriate way to finance the more expensive, unusual forms of care.
The Market and Human FreedomSpeech, 1981, Private Practice (July 1981); reprinted in the Congressional Record, Extensions of Remarks, September 9, 1981, pp. 19996 to 19997, introduced by Representative Larry McDonald of Georgia as “Professor Friedman’s recent article on this subject” in “Private Practice magazine for July 1981”, Congressional Record, September 9, 1981, p. 19997Checked against the sourceRead the originalWell the first and most important reform would be to eliminate the tax exemption of employer-provided medical care. … There’s no reason and logic, no reason on principle why medical care should be treated differently from other things. Food is just as essential to the life and health of a child. So is shelter and clothing. But those things we more or less let the private market take care of. What differentiates health? You might say, “Well, there are large costs involved. Sometimes you have to have big operations.” Well that’s what the private insurance is for. You have a large cost in a fire in a building. But that doesn’t mean that we have government fire insurance.
Context. From a November 2005 interview with Peter Robinson, conducted for the World Health Congress and printed in the Hoover Digest as “How to Cure Health Care.” Asked how he would reform the U.S. health-care system if he could ignore political realities. The ellipsis marks Robinson’s follow-up (“You’d do that before abolishing Medicare and Medicaid.”) and Friedman’s “Yes.”
How to Cure Health CareInterview, 2005, Interview by Peter Robinson for the World Health Congress, November 21, 2005; printed in Hoover Digest 2006 No. 4Checked against the sourceRead the transcript
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