An Unhealthy State of Affairs

By Karl Reiner

In 2010, Americans spent $2.6 trillion on health care, a distressing 18% of GDP. The cost in the U.S. was higher per capita than in any other industrialized nation.  Although it leads the world in money spent, a lower percentage of America’s population had medical coverage.

The need for health care reform has bounced around Washington for decades as costs continually increased. The Patient Protection and Affordable Care Act (known derisively as Obamacare) was an attempt to address the issue. Although it was passed by Congress in 2010, its main provisions will not be implemented until 2014.

It is a piece of complex legislation that has made many people unhappy.  A large number of Americans are afraid of it because they don’t understand the implications of what it tries to do.  By world standards, it was a moderate government attempt at trying to contain runaway costs and expand coverage.  It is not, as has often been stated, a government takeover of the healthcare system.

It expands the existing healthcare system by adding about 32 million of the presently uninsured to the insured list.  It doesn’t mandate death panels or the rationing of care.  It does prevent insurers from dropping coverage and affects lifetime limits. It contains an individual mandate that will penalize those who do not buy insurance.  When fully implemented, the law may actually encourage firms to find some new ways to deliver better health care for less money.

The try at controlling healthcare costs has met with a massive political backlash and strident demands for repeal. Opponents say it gives the federal government too much control. The insurance mandate is said to be a violation of constitutional and individual rights.  Many conservative Americans like to stress rights, but not obligations.  As they see it, the Constitution protects people from being forced into buying health insurance. When they become ill, however, society has an obligation to pick up the tab.  Unlike other countries, it is not our national interest for the government to encourage people to stay healthy.  

The framers of the Constitution didn’t include the matter of health insurance in their deliberations.  At the time the U.S. Constitution was drafted in 1787, there were a few million people living in a thin band along the eastern seaboard.  The geographical center of population was east of Baltimore, Maryland.  Gristmills driven by water power were high tech. Medicine was underdeveloped. Doctors knew little about germs and microbes; surgery was in its infancy. The average life expectancy was around 55.    
 
At the present time, most American workers get health insurance through their employer. Under our system, they pay part of the cost without realizing it. The money a firm spends on health insurance is not going to be available for wages or investment.  The ever increasing cost may be placing firms at a disadvantage in the global markets.

In Europe, health spending clearly shows up on the government’s books.  In the U.S., some of the cost is hard to track.  For example, the deduction for employer-provided health insurance runs around $ 434 billion per year, about 3% of GDP.  The failure to address illegal drug use in the U.S. also results in medical and policing costs.  It has been a good thing for the prison industry. Non-violent drug offenders now account for 25% of the prisoners incarcerated in the U.S.

With the federal government running deficits, the population aging and economic growth dragging, political gridlock has become the rule.  The government has also become the banker of last resort.  It has to bail out mismanaged sectors of the economy after the private sector runs them into the ground.  Although the unemployment rate has fallen to 8.3%, the labor market remains weak. If the people forced into working part-time or who have given up looking for work are included, the combined unemployment and  underemployment rate stands at 15% of the labor force.

The sullen, politically divided U.S. has started to worry about its shrinking status in the world.  America’s indecisive politics and slow growth raises doubts about our system of welfare capitalism.  Economic power is shifting in the world.  By around 2030, China will be the world’s largest economy followed by the U.S., India and possibly Brazil. With a population favoring a diminished government and consumption and speculation over infrastructure investment and education, maybe we should lower our expectations.