When I buy a Reese's Peanut Butter Cup at Walgreens and spend a dollar, that's my expenditure. But that dollar becomes Walgreen's revenue and it goes to cover the myriad expenses that went into getting that candy into my hand. Short version of the story: your expenditures are somebody else's revenue.
Needless to say, when I spend more, someone's revenue goes up. When I spend less, someone's revenue goes down. Let's also keep in mind that for my money, I get something else in return. Greg Mankiw:
A dominant government insurer, however, could potentially keep costs down by squeezing the suppliers of health care. This cost control works not by fostering honest competition but by thwarting it.
Recall a basic lesson of economics: A market participant with a dominant position can influence prices in a way that a small, competitive player cannot. A monopoly — a seller without competitors — can profitably raise the price of its product above the competitive level by reducing the quantity it supplies to the market. Similarly, a monopsony — a buyer without competitors — can reduce the price it pays below the competitive level by reducing the quantity it demands.
We see the downside of this cost-cutting quest by the Obama Administration. By cutting future revenues, we reduce the incentive to provide and we reduce the incentive to invent and to innovate. Sure, many people with a lot of accumulated human capital in the medical care industry aren't probably going to make career-changing decisions to leave the industry. But there will be people in the future who will steer themselves away from the industry because of the reduced income. With that comes reductions in health products, treatments, quality, etc - all those things that provide consumers with benefits.
Simply put, you cannot make the ceteris paribus assumption that everything else will be held equal. With a reduction in costs comes a reduction in benefits, and I am far from convinced that this is a positive trade-off.
HT Stephen Karlson.