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Health Care Costs

by Elaine Schwartz    •    Mar 10, 2012    •    697 Views

Looking forward to your daily Double Chocolaty Chip Frappuccino, you see that the calorie count sign says 500 calories. Change your mind? Most studies indicate that knowing a calorie count has little if any impact on purchasing decisions.

Then, you stroll to your local Whole Foods to pick up some fruit juice flavored carbonated drink. Defined by legislators as sugary, the beverage’s price includes a 7% “soda” tax.  The 7% extra does not dissuade you from making your purchase. Researchers have concluded that the threshold is a penny an ounce tax. Any less and people still buy.

Next stop, the doctor’s office where you happily notice that those thick folders of paper records are gone. The practice has fully digitized and now will save all of us money by following the cost saving precepts of the Affordable Health Care Act. Yes? Maybe not. One study from Harvard says that physicians who have fully digitized tend to order more medical tests, thereby increasing costs.

Mandating calorie count information, taxing sugary drinks and digitizing health records… each is supposed to pull down health care spending. But they might not work.

The Economic Lesson

Stanford University health policy expert Victor Fuchs says we need massive policy change to depress health care spending that averages $8000 a person, double Europe’s average. Why so high?

  • Too many specialists.
  • Equipment with excessive “standby capacity.”
  • Inadequate support for the poor who are chronically ill.
  • Drug prices.
  • Physician income.


A NY Times bubble interactive for President Obama’s 2013 budget shows perfectly where health care spending is going. Look at the 8.4% increase Medicare and Medicaid.

An Economic Question: Would you support Dr. Fuchs’s solution of a dedicated value added tax that funds universal coverage?

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