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.

In fact, it looks to me very much as though the times when medical spending grew rapidly as a % of GDP were the very times when real GDP was declining or growing very slowly, while the times when medical spending is flat relative to GDP were times when GDP grew rapidly.

This seems like an interesting model for constantly “racheting up” the %GDP spent on health care. When GDP is rising, health care costs are proportionally constant (i.e., rising in absolute $). When GDP is falling, health care costs are constant in absolute $ (i.e., rising in terms of %GDP). In other words, the growth rate in absolute $ is the maximum of GDP growth and 0 — but it doesn’t “feel” like we’re spending more, because there are always units in which the expenditure appears constant.

Does anyone know the politics of the end of the HMO revolution – was any US political faction pushing for that end?

Roughly speaking, Democrats pushed for the end of the HMO revolution. Not phrased exactly as such, but they pushed for new laws forcing health insurance plans to cover various items, require hospital stays after births, etc. Unsurprisingly, the AMA, fresh off opposing HilaryCare, supported such proposals, so there was a fair amount of bipartisan effort.

It’s sort of a reversal now; Democrats apparently will now be defending the government making exactly the sorts of decisions that they attacked private insurance doing.

In addition, other than your and Greg Mankiw’s conservative principles, the argument against use of taxpayer resources for the public option is pretty weak. The goal is not to promote competition. And though the goal should be to produce better health, it’s been framed to everyone as providing health care. If a taxpayer-resource-using public health care system outcompetes private insurance, that right there is argument that the taxpayers want government health insurance.