In 1970 the USA spent 7% of its GNP on healthcare, in 200716%. Whereas the OECD average per capita expenditure on healthcare in 2007 was $2,964, the USA spent $7,290. Yet in that same period, the health of America’s citizens relative to those of other developed countries declined dramatically, so much so that the CIA lists 49 countries whose citizens now can look forward to on average living longer than Americans. This paper looks for the causes of this colossal disparity between expenditure and results. It argues that they are due to the unique economic institutions that, beginning during WWII, have grown up around healthcare in the USA. Because the magnitude of the relative decline in healthcare in the USA is poorly appreciated, especially by Americans, this paper begins with a set of OECD data tables documenting that decline. The main body of the paper is an historical analysis of the institutional economics of American healthcare from 1940 to the present. The paper concludes with a brief consideration of the possibilities for serious reform.
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