Washington

Milton Friedman was not only a brilliant economist — a Nobel Laureate in fact — but he was a gifted writer. In his 1962 book Capitalism and Freedom he presciently explained how healthcare costs were going to leap out of control over the next decades. Sure enough they did. They multiplied from spending roughly one of every 20 dollars on healthcare in the 1960s to spending roughly one of every 5 dollars on healthcare today.

Now we spend more than $3.6 trillion on healthcare annually. That is to say, about $10,000 a person. The figure will be $5.7 trillion by 2026, though as Friedman predicted when the money is available we always spend more, much more. Demand for healthcare is “elastic.” Predictions of how many people will show up for free healthcare always miss the mark by a lot.

Today America spends more money on healthcare than all the other nations on earth spend on everything if you leave out China, Japan, and Germany. It is getting worse. Something must be done.

The demand for healthcare is, as Friedman said, elastic. If money and time are available for it, patients will keep going to the doctor. They will go to the doctor in unimaginable numbers or, shall we say, unbudgetable numbers? This is the history of modern healthcare. As government makes available money to pay our healthcare bills we spend the money, for it costs us very little, only time spent with the quacks.

As Hunt Lawrence and Dan Flynn have been saying in their thoughtful analysis of American healthcare, America “cannot afford to pay a fifth or more of the gross domestic product on one need with so many other needs (food, shelter, transportation, etc.) always looming.”

America is facing much more than a healthcare crisis. It is facing a federal deficit crisis of huge proportions. For now we conservatives say that the deficit crisis can be solved or at least alleviated by tax cuts. We believe the tax cuts will pay for themselves, but what can be resorted to to solve our healthcare crisis?

Surprisingly it could come from Silicon Valley. Earlier this year Amazon, Jeff Bezos’ tool for destroying such venerable institutions as Borders and Toys R Us, announced a partnership with JP Morgan Chase and Berkshire Hathaway to provide healthcare at a more reasonable cost to their 1.2 million employees. In his announcement Bezos declared that: “Hard as it might be, reducing healthcare’s burden on the economy while improving outcomes for employees and their families would be worth the effort.” His work with Chase and Berkshire Hathaway should be watched carefully. It may be his model for Amazon’s leap into healthcare.

Conventional approaches to the federal deficit rely on taxes. Whether we raise them as the Democrats prescribe or lower them as the Republicans prescribe both approaches are pretty conventional compared to what Bezos seems to be about to prescribe for healthcare.

The healthcare sector of the economy is bureaucratized and bloated. What Amazon plans to do on a small scale with Chase and Berkshire Hathaway it can do with the wider audience that it already has, Amazon Prime. There are sixty-seven million American customers paying $99 annually for Amazon Prime. With this base Amazon could easily challenge old-line insurers. And what could Amazon deliver to these customers? Lawrence and Flynn write: “Through telemedicine, digital record-keeping through its cloud, expanding its coverage for its employees to its customers… Amazon might streamline healthcare as it has streamlined so much else.”

Lawrence and Flynn speculate that if customers save, say, $3000 each per year on healthcare expenses the federal deficit would decrease by nearly $500 billion per year. Thus allowing still more tax cuts, spending on infrastructure, and other expenditures. Healthcare’s bite out of the federal budget would drop perhaps to the level of every other modern industrial country. Healthcare is the one sector of the economy where Bezos’ economics of destruction would be welcomed.