Health Insurance Reform and The Economy


Posted by AzBlueMeanie:

Our health-care system today was created by accident during World War II. Because wages were frozen at the time, employers attracted workers with the lure of benefits such as health insurance. As a result, employer-based insurance became the foundation of the U.S. health-care system. This accident of history has become unsustainable. The rising cost of employer-based health insurance is harming economic growth and hindering job growth.

As mcjoan at Daily Kos points out "in order to fix the larger economy, healthcare costs have to be brought under control. That's not just rhetoric, there's plenty of empirical evidence to back up the claim, including two brand new studies."

The first, conducted by the non-profit Rand Corp links the rapid growth in U.S. health care costs to job losses and lower output. Commenting on the study at BusinessWeek's Money & Politics blog, Cathy Arnst says

The Rand researchers examined the economic performance of 38 industries from 1987 through 2005, in an attempt to assess the economic impact of "excess" growth in health care costs on U.S. industries. Excess growth is defined as the increase in health care costs that exceeds the overall growth of the nation’s GDP—a yearly occurrence in the U.S. The team compared changes in employment, economic output and the value added to the GDP product for industries that provide health benefits to most workers to those where few workers have job-based health insurance.

After adjusting for other factors, industries that provide insurance had significantly less employment growth than industries where health benefits were not common. Industries with a larger percentage of workers receiving employer-sponsored health insurance also showed lower growth in their contribution to the GDP….

The rate of growth in U.S. health care costs has outpaced the growth rate in the gross domestic product (GDP) for many years. In 1940, the share of GDP accounted for by health care spending was just 4.5%. By 1990, it had reached 12.2%, and 16% in 2005, when health care spending totaled nearly $2 trillion, or $6,697 per person, far more than any other nation. This year health care spending is on track to equal 18% of GDP.

That's largely the reason why so many American businesses are supporting reform.

Wal-Mart, on the other hand, recently came out in support of a mandate on employers to provide health insurance, and the temp firm Kelly Services, which employs thousands, followed with a similar statement.

Less noted has been the diversity of opinion among small and medium-size businesses. Many agree with the Chamber that a public insurance option would undermine the private insurance market and that requiring companies to provide coverage would impair job growth. Others say the current system is so broken that they are assessing whether to support the reform plans.

The wait-and-see approach that many businesses are taking — alternately skeptical and hopeful — is a further sign that the alliances that previously scuttled health-care reform may be scrambled this time around, not just in the health-care industry but also in the business world at large. President Obama and congressional Democrats face formidable obstacles to their reform efforts, but one factor in their favor is businesspeople who may not be as inclined as they were in the past to bring grass-roots pressure against reform.

Another new study, conducted by the progressive Center for American Progress looks at the potential costs for American families if the system isn't reformed.

Health care costs are expected to grow 71 percent over the next decade, which will in turn drive premium increases for health insurance. Unless we take serious steps now to reform our health care system—in particular to reduce the rate of growth in health care costs—health insurance coverage will slip out of reach for even more individuals than the 52 million Americans who today are uninsured.

This analysis shows that without health reform, average family premiums will grow to more than $22,000 by 2019, up from $13,100 today. In some states with higher-than-average premiums, family premiums will exceed $25,000 in 10 years. Of course, a family’s total health care costs will be even higher once co-payments and other out-of-pocket expenses are calculated into the total.

The costs of not fixing this now are extreme, and have the potential to bankrupt not only individual Americans, but the country. It will continue to hamper job growth, which will in turn lead to more people unable to get insurance, which in turn will increase the premium costs for those "lucky" enough to have insurance. This is not an acceptable future.

It is time for Americans to end this accident of history and decouple health insurance from one's employment. Current proposals to mandate employer-based health inurance and to require individuals to purchase health insurance are merely attempts to maintain the current system just a little while longer. It will not succeed in the long-term. We are only delaying the inevitable day when a single-payer public health insurance system will be enacted out of economic necessity.

In the end this is all the insurance industry really wants — just a little while longer to squeeze that last dime out of Americans before the inevitable day when their fleecing of America must be brought to an end out of economic necessity.

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AZ BlueMeanie
The Blue Meanie is an Arizona citizen who wishes, for professional reasons, to remain anonymous when blogging about politics. Armed with a deep knowledge of the law, politics and public policy, as well as pen filled with all the colors stolen from Pepperland, the Blue Meanie’s mission is to pursue and prosecute the hypocrites, liars, and fools of politics and the media – which, in practical terms, is nearly all of them. Don’t even try to unmask him or he’ll seal you in a music-proof bubble and rendition you to Pepperland for a good face-stomping. Read blog posts by the infamous and prolific AZ Blue Meanie here.


  1. The best thing we can do for the American people and all peoples worldwide is to educate and encourage a diet high in fresh fruits, herbs, berries and veggies as well as physical activities.

  2. A recent study (maybe that same Rand study) also showed that small businesses that provide health care for workers pay a lot more in proportion to their market cap for health insurance than large corporations.
    If you are a small business owner who is trying to do the right thing by your workers and give them benefits you are not only fighting against the better deal the big corporation get on health care, but you are also fighting the Scrooge competitor that doesn’t give his employees health care or benefits (nobama?).
    Our current system lets the worst actors define the marketplace for everyone else. These hateful people need to go out of business and if health care reform is the thing that does that to them then let’s sign that bill tomorrow.