What 'Government Takeover'?

There have been lots of absurdities in the debate—such as it is—about health care reform. There's the hypocrisy of people dependent on government-run health care complaining about government-run health care. And now comes the Republican canard that the current health care reform proposal constitutes a government takeover of one-sixth of the economy. Here are Rep. Steve Buyer of Indiana, Rep. John Fleming of Louisiana, and Sen. Jim DeMint of South Carolina making precisely that argument.

First, the proposed health care reform does not take over the system in any sense. Much to the chagrin of progressives, the bills under consideration don't contain a public option and don't provide for a single payer. In fact, they provide subsidies for millions of people to purchase private insurance.

Second, such statements reveal how pathetically little many of our policymakers and pundits understand American health care spending. We're already halfway toward socialized medicine, but not because of Obamacare. (Here's a column I wrote about this in December 2006.) Over the last couple of decades, as the private sector has done a miserable job controlling costs, as employers have felt less and less compelled to offer health care benefits as a condition of employment, as the population has aged, and as the government created new health care entitlements, the government has been slowly assuming a higher portion of health care spending in the United States—or "taking it over."

Check out Table 123 in the CDC's big annual report. In 1990, health care expenditures in the United States were split, 60-40, between the private and public sectors. By 2000, the ratio had fallen to 55.9-44.1. In other words, in the 1990s, a period in which Republicans controlled the House for six years, the share of health spending controlled by the government rose by 10 percent. The trend continued in the period from 2000 to 2008, when Republicans controlled the White House and largely controlled Congress. The recession boosted the poverty rate, making more people eligible for Medicaid, and led to the reduction of millions of payroll jobs, which led to losses in job-related insurance.* By 2008, according to the Centers for Medicare and Medicaid Services, private health care expenditures had fallen to 52.7 percent and public had risen to 47.3 percent. In pretty much every year of the Bush administration, the government "took over" a greater chunk of the health care sector. And many of the Republicans who are complaining about reform proposals today didn't utter a peep. In fact, they helped the process along by voting for the Medicare prescription drug benefit in 2003. (Hat tip to Jonathan Cohn of The New Republicfor the references.)

CMS also notes that thanks to these trends, public spending will soon outpace private spending—even in the absence of significant reform. "As a result of more rapid growth in public spending, the public share of total health care spending is expected to rise from 47 percent in 2008, exceed 50 percent by 2012, and then reach nearly 52 percent by 2019."

So, to reiterate, we're already half way toward fully socialized medicine. The government has already taken over one-twelfth of the economy—and more every day. That's the status quo the opponents of reform are defending.

Daniel Gross is also the author of  Dumb Money: How Our Greatest Financial Minds Bankrupted the Nationand  Pop!: Why Bubbles Are Great For The Economy.