Rising health care costs as the preference of a wealthy nation?

While health care costs are undeniably rising fast, this is not necessarily a sign of something wrong with the system. It could simply be a reflection of the legitimate preferences of an increasingly wealthy nation. After all, once basic necessities are met, it is reasonable to assume that an increasing share of each extra dollar earned will go to things that improve quality of life, like health care, beauty aids, or recreation.

In fact, that is what has been happening. Over the past 20 years, spending on recreation, health clubs, even lawyers, has climbed at about the same rate as health care. (See Table 1.) Yet nobody talks about a national health club crisis, or the need to reform the nation’s recreation industry.

Table 1
Chasing Quality

Spending increase, 1984 to 2004

Computers	1,600%
Recreation	386%
Medical care	362%
Higher education	344%
Hair stylists and health clubs	301%
Legal services	279%
Housing	226%
Furniture	178%
Food	154%
Clothing	131%
Gross Domestic Product	198%

Source: Bureau of Economic Analysis

Table 2

Shielding Consumers
Out-of-pocket spending on health care as share of national health expenditures.

1960	1970	1980	1990	2000	2004
46.7%	33%	21.5%	19%	14%	12.6%

Source: Center for Medicare and Medicare Services