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Reforming the Health Care System is Good for the Economy

By Dr. Ram Krishnamoorthi
. 1 Comment(s)

The passage of the Affordable Care Act in March 2010 was the culmination of over a year’s worth of debate about our health care system, making the decades-old crisis centerstage for the first time in 16 years. But despite the early attention, the health care crisis and the sweeping reform law have not persevered as pressing election year issues. A new Kaiser tracking poll reveals that the health care issue will not affect whether most Americans will vote. Proponents might hope that this is because the ACA’s passage has quelled Americans’ health care anxieties, but not so. In fact, where the issue is popular is among opponents who have threatened repeal of “Obamacare,” and voters have excused them for having no real ideas to replace it. Worse, many Democrats who passed the ACA are not even bragging about their accomplishment, the most sweeping reform of our health system in over 40 years, expanding affordable insurance to over 30 million uninsured Americans and ending some of the most egregious of insurance industry abuses.

It’s clear that much of this unpopularity stems from a well-oiled, coordinated misinformation and fear campaign run by opponents of health reform who may win political points in vilifying it.

However, more prominently, polls find that Americans are not thinking about health care. Instead they are concerned first and foremost with jobs; i.e., it’s the economy, stupid.

The Kaiser poll reports that while health care is not lowest on the list, it is 3rd among likely voters behind the economy and dissatisfaction with government. Accordingly, as Kaiser’s president Drew Altman explains, voters vote less on specific issues in midterms and more on the direction of the country.

Still, opponents make a damagingly false connection between economic priorities and health reform, arguing to Americans that health reform is too expensive in these economic hard-times, another financial burden in their personal lives, to their businesses, and to the national debt.

These claims are frustratingly wrong. Because the truth is that reform of our health care system is good for the economy, including job growth and job security.  In fact, in the long term, the health of our economy depends on health system reform. 

The direct economic burden of our health care crisis is well-known. At over $2.5 trillion per year, expenditures on health care represent 17% of the entire economy, and are growing at 5-6% per year. The largest piece of the U.S. government’s budget is devoted to entitlement health expenditures, growing at a similar clip, overwhelming the tax base and decreasing resources for other social services. If we were getting matching returns on this increasing expense, it might be justified, but with probably 60 million uninsured estimated by 2015, a declining life expectancy at birth, and a rank of 37th in the World Health Organization’s list of national health systems, our health care system is one terrible economic investment.  

At the family level, the burden is scary. Under-insured and uninsured Americans are one major illness away from medical bankruptcy, and the individual market is either prohibitively expensive or just won’t give it to you for pre-existing illness. Our predominantly employer-sponsored health insurance system has entrenched anxieties for every business that has to attract employees or preserve health benefits for a loyal workforce. Everyone’s pocketbooks suffer economically from the problem of the uninsured and underinsured, whether we like it or not: It is estimated that an additional $1,000 per year is picked up in premiums by the insured to pay for the health care of those without coverage.

The ACA addresses several direct cost problems for the federal government, cutting about $100 billion from the budget deficit over 10 years through cuts. To bend the curve of direct health expenditures, cost saving and quality improvement proposals that affect the health care delivery system have been launched as experiments, partly because politics precluded binding cuts and partly because more research is needed. It’s a start.

But it is not only what we directly spend on medical care that costs us.  Poor health is bad for the economy.

For example, in 2003, approximately $63 billion was directly lost due to work-days missed from illness and injury [1]. According to a Commonwealth Fund study, the larger problem of productivity lost from illness may mean up to $240 billion per year. Much of this illness may not be preventable. But some of it is: cardiovascular disease, complications of diabetes , and obesity for example might be at least partially stemmed if managed earlier through primary care [2],[3],4].

And unemployment is bad for our health. As Americans lose their jobs, physical and mental illness may be exacerbated and losing one’s insurance worsens the spiral, leading to skimping on health, less employability, and more dependence on the strained public safety net.

Lack of insurance options limits employment options, for suppliers and demanders of labor. The Nobel Prize in Economics was awarded this year to three economists who recognized that even if there are jobs available in a tough economy, many unemployed individuals don’t take jobs that are not a good fit for their training or their other needs. In a similar vein, lack of health benefits is a major reason many Americans have to pass on certain jobs, even when jobs are scarce. Even for the employed, the lack of portability of employer-sponsored insurance system stifles mobility among jobs. Or, it’s forced because annual caps limit the extent of insurance.

The ACA will establish health insurance exchanges to pool individuals and small businesses’ purchasing power for qualifying insurance policies. Regulation of insurance industry abuses make plans open to many previously uninsured. Tax credits and subsidies for affordable  options will address much of the conflict between seeking employment and desiring insurance.

Health policy analysts debate how best to bend the cost curve while improving the quality of our medical care system. For long-term economic growth, we have to ask, fundamentally, how can we reform our system to actually improve our nation’s public health? And in assessing the economic benefits of such reform, focusing only on the direct fiscal cost would be near-sighted. Prevention, for example, has not been proven to save money in direct health care dollars, but it may make the workforce healthier in the long run. Incentives to quit smoking and eat better and improving public transportation to encourage walking may also take big infrastructure investment, but may make lifestyle changes easier. Making healthier eating cheaper, attracting healthy grocery stores to poor urban and rural neighborhoods, and removing vending machines in public schools may be expensive in the short term, but may pay big dividends in the long run.

The United States is at a crossroads in its economic history, reforming the financial industry, renewing our manufacturing base, and revolutionizing the energy sector. In a concurrent paradigm shift, comprehensive reform of our health system must be part of this change. Reforming the health system is already good for economic growth, but for this to last, we must have the vision to make the necessary investment in our economic future.

[1] Yassin AS. “Cost of lost work and bed days for us workers in private industry--national health interview survey, 2003.” J Occup Environ Med. 2007 Jul;49(7):736-47 (abstract).

[2] Sullivan PW, et al. “Productivity costs associated with cardiometabolic risk factor clusters in the United States.” Value Health. 2007 Nov-Dec;10(6):443-50. (abstract).

[3] Vijan SHayward RALanga KM.The impact of diabetes on workforce participation: results from a national household sample. Health Serv Res. 2004 Dec;39(6 Pt 1):1653-69 (abstract).

 [4] Finkelstein EA, et al. The costs of obesity in the workplace. J Occup Environ Med. 2010 Oct;52(10):971-6. (abstract).

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  1. Raji Bala

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    Ram your article is well thought of and flows very well.

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