• Personal spending on health care went down last century, a lot [wrong]

    Um…I was totally wrong about what I wrote below. Corrected in a new post. Don’t even read the following.

    In a post on the cost of housing, Matt Yglesias included an interesting figure yesterday (it originated in a David Leonhardt column).

    [The following is totally wrongSee correction in a new post.]

    Anything look funny about this? Oddly, neither Yglesias, nor Leonhardt, nor the chart’s own caption make any mention of the line that exhibits the most movement. It’s right there at the top of the figure: health care! That’s not the most striking thing. The most striking thing is that the proportion of personal spending on health care declined a lot from 1940 to 2000. It was cut in half. That’s amazing. Since 2000, the proportion of personal spending on health care increased quite a bit too, going back to the level achieved in the late 1970s. Out-of-pocket health costs have really gone way up lately. No wonder people are upset.

    Still, looking at this graph alone, one might think, “What health care cost crisis?” We’re spending far less of our personal resources on health care than at any time from 1940 until the late 1970s. What’s the big deal? What are we so worked up about?

    I suspect what this reveals is that the government has taken on an increasing share of health care costs. Medicare and Medicaid budgets are exploding. In effect, we’re paying for that too, just with taxes (current or debt-deferred).

    Employer spending on health care–which really took off after WW II–is probably also not reflected. We pay for that too through lower wages. (I’ve got a full post on just that coming up; if you can’t wait, read this old one.)

    Nevertheless, it is striking how much less we directly spend on health care today as compared to most of the post-war period. Likely, this fact is part of why health care costs have gotten so out of control. If the average Joe just doesn’t perceive government or employer health care spending as acutely as his own then he overlooked a major national budgetary hemorrhage. From this perspective, I can certainly see why some are so passionate about consumer directed health plans. More people have to feel the pain (though many really are already). The figure suggests that, in aggregate, we just aren’t–not directly anyway, which is what counts.

    • Austin
      Something seems off. Food, a primary driver of personal expenditures in decades past, is not reflected in graph above. If you recall, in the recent recalculations of what qualifies as “poverty” (NYC big in this) number crunchers took into account greater costs for housing, etc., and marked drops in food costs. They were in excess of 20% for some time. Did not search extensively, but quick Google search brought this up:

      Maybe comparing apples to oranges in the methods or units, but again, something is askew.


      • @Brad F & Steve – I’m puzzled by each of your comments. Food isin the graph, third item down. Brad is right that the line for it is not consistent with the graph at the site to which he refers. I’m sure there is an explanation for that, but I couldn’t possibly tell you what it is.

        As for reading the chart wrong, I doubt that I am. Our best clue about the labels’ correspondents to the lines is the right-hand ordering of each of them. For the bottom three, there is an explicit link drawn. Thus, health care is the top line. If one wants to claim there is a problem with the chart that pertains to the labels, it isn’t in my reading of it, but it could be that the chart is just mislabeled.

        But I doubt that too. Just go to the BEA website (the source for the chart) and see what they say for health spending and total personal spending. The ratio is 19% in 2009, exactly what the chart says.

    • I think you’re reading this chart wrong. It looks like food spending is what has consistently dropped and healthcare spending has been rising significantly.

    • I agree Health Care is the top (~20%) line on the right hand side, but I’m pretty sure that the health care and food lines cross roughly at 1990 with the rising health care line being slightly lighter gray than the falling food line.

    • What I meant by “not reflected” is the % referenced in my included link, not that food was overlooked in your embedded graph– it’s clearly there.

      I still feel something is off though. Historical costs for food were very large years ago and factored large in calculations defining poverty/affordability.