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Congressman James H. Scheuer, Chairman
Subcommittee on Education and Health
The Joint Economic Committee
United States Congress
Re: Capita Health Spending and Per Capita GDP
Dear Mr. Chairman,
This testimony is offered in response to your invitation related to the May 1988 hearings of your subcommittee on the subject of The Future of Healthcare in America. It is directed in particular to an exhibit submitted by one of the witnesses which displayed in graphical form the relationship[ of increasing Gross National Product to per Capita Health Spending, drawing upon the national experience of a number of foreign countries. The stated source for the data points of this graph was the Organizations for Economic Cooperation and Development: Social Data Bank. There is no quarrel with the accuracy of this data as given, or the conclusion that the graph is persuasive that increasing national wealth leads to increasingly larger allocation of resources to health care, over the portion of the curve on display.
Increasing personal wealth leads to more disposable income and proportionately less spending on necessities. Because of the persuasive linearity of this segment of the curve, however, it seems important to draw attention to the fact that an extrapolation of it is highly counter-intuitive. If each of us merely lets his mind drift among the richest people known to us through the newspapers or remote acquaintance, a conclusion is inescapable that such persons surely devote considerably smaller proportions of their income to health care than do the national average. That is to say, it is inconceivable that there can be an infinite straight line upward relationship between income and the proportion of that income devoted to health care. Somewhere, at some point, the upward straight line must level off, and ultimately decline. Since national averages are aggregates of individuals, what is true for individuals must also be true of nations, and we should be resistant to the suggestion that it is necessary to provide statistics to prove it.
The value of Searching for the bend in the curve. Statistics would be useful, however, to try to determine the general region of personal income in which the curve level off in contemporary America. If Congress were to commission such a study, it might be in a somewhat reflective of the greater home resources and improved transportation in America, as contrasted with the other nations examined. As a matter of fact, less than a hundred years ago hospitals were exclusive places for the management of indigents, all others receiving medical and surgical care in their homes.
What is the significance of the rising early portion of the curve? The simple reflections strongly suggest that medical care should get less expensive at some time in the future as the population generally becomes more prosperous and that eventually a declining proportion of disposable income will be devoted to health care. And yet, the upward rising curve suggests otherwise. I wish to lay before you the suggestion that the upwardly rising portion of the curve really reflects two things: that impoverished nations are able to rectify an increasing amount of their health spending deficiencies as they become slightly less impoverished. And second, wealthy nations can occasionally decide to spend money on research and technological advancement, even though the parsimonious approach is obviously to hang back and let others sustain the inevitable waste of being first.
George Ross Fisher, M.D.