Milton Friedman on Health Care: "Nobody spends somebody else's money as wisely as he spends his own"


At Forbes, Peter Robinson argues that Congress and the president should look to Milton Friedman to understand the real origins of America's health care woes:

Since the end of the Second World War, Friedman explained, medical care in the U.S. has displayed three features: technological advances, increases in spending and rising dissatisfaction….

The policy mistake that produced this illogical mess took place during World War II, when the government imposed wage controls. Unable to compete for workers by paying them more, employers began providing medical care, and the new benefit spread rapidly.

When the Internal Revenue Service caught on, requiring employers to include the value of medical benefits as part of the wages they reported, workers, who had grown accustomed to the benefits, protested. Congress responded with legislation that made employer-provided medical benefits tax-exempt.

By the time the 1960s arrived, Americans were used to having third parties pay their medical bills. Thus the enactment of Medicare and Medicaid–under which the government, rather than employers, acted as the third party–seemed perfectly reasonable.

Read the rest here.