As Americans contemplate a significant expansion of government’s role in health care, in the form of the Medicare-like “public option” proposed by President Obama, we must consider how successful Medicare has been at controlling costs in relation to privately purchased health care.

This analysis takes all health spending in the United States and subtracts the costs of the two flagship government programs, Medicare and Medicaid. It then takes that remaining spending and compares its historical costs with Medicare’s.1 It finds that Medicare’s costs have risen to a far greater extent: Since 1970, Medicare’s costs, even without the Medicare prescription drug benefit, have risen 34 percent more, per patient, than the costs of all health care in America apart from Medicare and Medicaid — the vast majority of which is purchased through the private sector.

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