The Unindicted Conspirator: High Healthcare Spending and the Rise of Third-Party Payment

Abstract

Healthcare spending in the United States is dominated by government and insurers, which are collectively called “third-party payers.” In 1960, patients controlled how almost 50 cents of each dollar spent on health care was paid. That number is now down to just over 10 cents, with the rest controlled by third-party payers. This separation of payer from consumer is associated with a significant increase in real healthcare spending per capita, with poor quality, and with waste that amounts to about one-third of healthcare spending. However, this result is not a natural economic outcome. Rather, it is the consequence of public policy that can, and should, be amended or reversed.