Rapid Rise of Healthcare Costs

Rapid Rise of Healthcare Costs

I just returned to the Boston area from a couple of weeks in South Carolina and was amazed by how much advertising for medical services there was on TV. I happen to hook up with a local lawyer on the golf course and he suggested that the costs started rising disproportionately (labor rates in higher end healthcare grew much faster than others) in the 60s and 70s when privatization of healthcare started. Though it sounds reasonable, I wonder if is not related to the issue discussed in a previous post “Exorbitant Salaries Revisited”.
“ Gladwell pointed out that there was a surge in the salaries of athletes, entertainers, lawyers and CEOs starting in the 70s. He correlates this with availability of capital. Prior to that time capital was scarce, but in the 70s there started to develop an overabundance. With a shortage of capital, when it came to bargaining for wages with talent, capital had the upper hand. The balance of power shifted in the 70s and instead of talent competing for capital, now capital was competing for talent and gave in to the demands for higher wages.”

Over the last several decades there has been a rise in average wages in the US. But when one looks at the numbers, the middle and lower wages have stagnated while the upper range has increased dramatically. (Doctors wages went up by a factor of two to three) though the argument for increase in availability of capital is plausible, I wonder if there are not other factors and explanations and how they relate to the widening gap between the very rich and the “not so rich”. Certainly different rates of change in wages explain the widening of the gap. But what are the underlying causes? If it is access of capital, then what brought about the access? Is the underlying cause related to government policies and if so, which? Or is it globalization where wages for the high-end skills are competing on a global scale where there is a strong demand and not much availability?

I will give this topic more thought, both as it relates to healthcare and in general and would appreciate hearing others. It would still be interesting to see statistics on increase in healthcare cost vs. degree of privatization in the industry over the last 40 or 50 years. Navigio, you are very good with facts and statistics. Maybe you can find some time to explore this. (I have the time but not the skill)