America spends more
on medical care than any other nation, with no noticeable difference in
results. It is commonly thought that this is a result of a defect in the
organization of medicine in the US, which can be repaired by “reform.” However,
medicine is a labor-intensive good and labor is more expensive in the US. We
show that these conditions will invariably lead to a higher price and a higher
percentage of GDP spent on medicine. Thus, while reforms may improve the
functioning of the health care sector, they are unlikely to have a major effect
on spending levels.
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