The economics of health care

One of the main arguments against expanding affordable health coverage to more Americans is the price tag.

Taxpayers can't afford to take on a new obligation, opponents say, when the economy is still losing jobs and the deficit soaring.

But, really, the weaknesses in the economy are arguments for reform.

Until we put the brakes on health care costs, the economy cannot fully rebound. We will continue to suffer from bloated deficits, rising individual medical costs and a competitive disadvantage with advanced economies that have figured out how to cover all their people.

The biggest driver of the federal deficit by far — more than the wars, bailouts and stimulus — is health care. And it's only going to get worse as the Baby Boomers age into Medicare.

Without reform, Medicare Part A which pays for hospitalizations is projected to run short of money in eight years. The choices then will be higher taxes or lower benefits.

Health care costs that far outpace inflation and wages also drag down business and individual income.

We spend 44 percent more per capita on health care than Switzerland, the country with the second highest expenditures, and 134 percent more than the median for countries in the Organization for Economic Cooperation and Development, according to researchers at Johns Hopkins Medical School.

In practical terms that means health care costs add $1,500 to $2,000 to the price of every GM vehicle.

"These costs prompt fears that an increasing number of U.S. businesses will outsource jobs overseas or offshore business operations completely," says the Council on Foreign Relations.

"The United States spent 16 percent of its GDP in 2007 on health care, higher than any other developed nation. The non-partisan Congressional Budget Office estimates that number will rise to 25 percent by 2025 without changes to federal law."

Fewer and fewer businesses can afford to cover their employees. The number of uninsured Americans grew by 6.6 million between 2001 and 2008 to 15.4 percent of the population.

Uninsured Kentuckians increased to 15.1 percent of the state's population in the latest Census data, up from 13.8 percent in the previous period. Earlier surveys suggest that more than eight in 10 uninsured Kentuckians are low-income workers.

These estimates don't include people who lost jobs this year, so the number of uninsured is now almost certainly higher.

What better time to make health insurance more affordable than when so many Americans are under- or unemployed?

The high cost and uncertainty of obtaining individual insurance is a disincentive to innovation. How many would-be entrepreneurs are afraid to strike out on their own or start companies because they can't risk giving up a job with health care benefits?

As long as we're paying more and more to cover fewer and fewer people, the nation's long-term fiscal and economic health is at risk.

"If health costs per beneficiary simply rose at the same rate as per capita economic growth, rather than growing considerably faster, nearly three-fourths of the massive long-term fiscal gap we face would be closed," said Robert Greenstein of the Center on Budget and Policy Priorities, testifying to a Senate committee earlier this year.

The plans winding through Congress and advocated by President Barack Obama would put us on a path to lower costs while covering more people.

The bill that's cleared the House is estimated to cost $1 trillion over the first 10 years, mainly to provide subsidies to people who can't afford health insurance. The Senate plan is less costly.

To put that in perspective, the tax cuts enacted during the Bush administration will end up costing $2.5 trillion over their first 10 years, according to Citizens for Tax Justice, or 2.5 times the most expensive health reform plan.

The real question is not whether we can afford to reform the way we pay for health care but whether we can afford to wait.