If you are a patient you might complain of avaricious HMOs, distracted doctors, or the difficulty of getting decent health insurance. If you’re a doctor you’ll carp about demanding and litigious patients or managed care organizations and government agencies that swamp you with paperwork and won’t let you practice good medicine. If you happen to be a managed care executive or a Medicare official, you will fume over doctors who use too much expensive technology on too many grasping patients-patients who (you’ll mutter) refuse to make lifestyle choices to prevent their expensive illnesses in the first place. If you run a biomedical company, you’ll bemoan the regulators who live only to prevent you from introducing your life-saving inventions to the marketplace. And if you’re one of those regulators, you’ll complain about a fickle public whose whining results in your being constantly hauled before congressional subcommittees, today for rushing unsafe products to market before they are fully tested, tomorrow for delaying the approval of critical medical products for the sake of your self-serving bureaucracy.

Like blind men feeling an elephant, we see the problems troubling the healthcare system as being narrow, well defined, tractable-and personal. We see solutions with a false sense of clarity: to fix healthcare we should institute universal health insurance or pass tort reform or let market forces reign or loosen FDA regulations or tighten FDA regulations. And we have a hard time understanding why the politicians and policymakers refuse to institute whichever simple fix we’ve set our hearts on.

On the other hand, many of my physician colleagues in those days, as not-quite-disinterested observers whose incomes depended on society’s willingness to spend lots of money on healthcare, were saying: Who says thirteen percent is too high? If not healthcare, what should we spend the money on? Caribbean cruises? Sports cars? Why not spend twenty or twenty-five percent or even more of the GDP on healthcare?

I cannot blame my doctor friends for asking a question as reasonable-sounding as this one. The correct answer, however, is not the one they expected. For there is indeed a fundamental limit on how much society should spend on healthcare. We were exceeding that limit in 1994, and we’re certainly exceeding it now.
That limit is defined by a straightforward economic principle: When we are buying consumable products that we are consuming ourselves- products like Caribbean cruises, sports cars, ice cream, and healthcare-we should spend no more than we are able to pay ourselves.

We are spending more on our healthcare than individuals are able to pay, and we have been for quite some time. In 2002, for instance, we spent an average of $5,440 per year on healthcare for every person in the United States. This is far more than most Americans could comfortably pay by themselves, without the benefit of employer-supplied, taxpayer-subsidized health insurance.

More importantly, this amount is greater than we are able (or at least willing) to pay on a collective basis. Instead of paying for our healthcare as we go, we’re adding much of the cost to the national debt. The expense accrues to the debt two ways. A big chunk of American healthcare is provided directly through government programs like Medicare and Medicaid. But even private healthcare is supported by the government through tax deductions for insurance premiums; so even for those of us with private health insurance, much of the cost of our healthcare gets added to the national debt. Thus have we arranged to pass on a huge and growing financial burden to our children, grandchildren, and generations yet unborn, in violation of the principle that those who consume products or services ought to pay for them.