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Milton Friedman on Medicine and health care

We have become so accustomed to employer-provided medical care that we regard it as part of the natural order. Yet it is thoroughly illogical. Why single out medical care? Food is more essential to life than medical care. Why not exempt the cost of food from taxes if provided by the employer? Why not return to the much-reviled company store when workers were in effect paid in kind rather than in cash?

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. Just before, he explains that medical care is exempt from income tax only when the employer provides it.

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/why-single-out-medical-care-company-store-2001

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He also said

  1. Well 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 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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  2. 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 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
  3. 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

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