By Arnold Kling
We estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2 percent in 2020 and nearly 8 percent in 2030.
In other news, cold fusion will increase real GDP relative to a no-cold-fusion baseline by nearly 22 percent.
The CEA alludes to the “difficulties involved” in controlling cost, but they do not come close to spelling out what those difficulties really are. The problem of health care costs is this: If you allow people to have unlimited access to medical services without having to pay for them, consumers and their doctors will elect medical procedures with high costs and low benefits. You have to either limit access (through rationing or supply constraints) or change to a consumer-driven system with a much higher share of out-of-pocket spending. Neither of those is a free lunch in terms of being painless to implement.
If you need someone to tout health care reform as a free lunch, you can always find a political hack to do the job. It’s not a function for the Council of Economic Advisers.