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Milton Friedman on Medicine and health care

Two 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 Care
Column, 2001, Hoover Digest 2001 No. 3; a shorter version of his essay in The Public Interest, Winter 2001
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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/third-party-payment-nobody-spends-somebody-else-2001

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  1. 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 Care
    Column, 2001, Hoover Digest 2001 No. 3; a shorter version of his essay in The Public Interest, Winter 2001
    Checked against the sourceRead the source
  2. Nobody spends somebody else's money as carefully as he spends his own. Nobody uses somebody else's resources as carefully as he uses his own.

    Context. Asked why private property is so central to freedom, given the Marxist claim that property is theft, in a PBS interview for the series Commanding Heights.

    Commanding Heights: Milton Friedman interview
    Interview, 2000, PBS, “On Freedom and Free Markets,” interview conducted October 1, 2000
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  3. I’m old enough to have participated in the medical system before World War II. And there was no third party. And the most obvious difference is when you went to a doctor or a hospital, the first question you were asked before the war was, “What’s wrong with you?” When you go to a hospital or a doctor now, what they ask is, “What’s your 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.” Discussing why most American medical bills are paid by third parties, insurers and government, rather than by patients.

    How to Cure Health Care
    Interview, 2005, Interview by Peter Robinson for the World Health Congress, November 21, 2005; printed in Hoover Digest 2006 No. 4
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