And as always, I think three things should be noted:

(1) those expenses are for medical care, not health;

(2) medical care is not the same product year-to-year, and it’s effectively illegal to offer the 1980 version of medical care today, in spite of the fact that it would be vastly cheaper;

(3) the service the medical community offers is Not Dying; demand for this is pretty close to completely inelastic (i.e. Would you rather give up all your worldly possessions, or die?)

Why are medicine costs growing exponentially exponentially in the first place?

The original blog post showed a graph of health care costs as a percentage of GDP over time. Is there any causal relationship between the two? I doubt it, but If there is, which way does it go?

More likely, still, there are other, more important, factors that influence health care costs. Let’s examine the effects of the aging demographic profile. Let’s look at medical malpractice settlements and the effect on insurance premiums. Let’s look at the lack of preventive medical practices (that would reduce more costly procedures in the future). Let’s look at the growth in (what I call “frivolous”) drugs for every minor ailment known to mankind, the expensive ads that promote their use, and the cost of prescribing “labor”. Undoubtedly, there are many more.

Make no mistake, it is not GDP that causes health care costs to rise. Given the size of the health care “industry”, it is possible that it has a significant impact on GDP growth, however.