HEALTHCARE SPENDING

Benjamin Franklin once said that the only certainties in life were death and taxes. To that should be added, in rich countries at least, rising healthcare spending.

When the National Health Service was set up in the U.K. after the Second World War, Ministers cheerfully thought that within a decade or so, it would no longer be needed, since everybody would by then be cured and healthy. That is probably one of the most spectacular misjudgments of all time, as healthcare spending has increased relentlessly ever since, fuelled by two developments. First, doctors are devising ever more, and ever more expensive, treatments. When my Aunty had a hip replacement in the 1960's, it was cutting edge surgery. Now doctors think of such an operation in much the same way as a mechanic does when changing a tyre; they have moved on to more exciting stuff such as keeping premature babies alive at an ever smaller number of weeks.

Secondly, what the market supplies (healthcare) is not really what we want (which is good health). In many cases the two will match; if I break my leg in a clean fracture, then treatment will probably, though not always, make it good again. Yet nobody really knows why some people get cancer and others don't; and nobody really knows why some people get cured of it and others die.

Because of the market mismatch, sick individuals are willing to consume a potentially unlimited amount of healthcare. And because of technological developments, that healthcare gets more and more expensive. Nowhere is this truer than in America. In 1950 it spent 4.4% of its economy on healthcare; today, that figure is 17.2% of a (hugely bigger) economy. In other rich countries, today's percentage figure is not as high; but in all cases, it is a lot higher than it was 50 years ago.

At some point, you would think, the curve should stop rising. But why? The biggest consumers of healthcare are the elderly, who also happen to be the most assiduous voters. Any politician unwise enough to think of cutting their benefits is likely to be ousted pdq. Indeed, the advent of new diseases (SARS in China, Ebola virus in Africa, penicillin resistant swine flu in Denmark) will keep doctors busy with their researches for many years to come. Expect those healthcare costs to keep on rising.

Walter Blotscher