The American economy grows at an anemic rate because our hospital bills grow at an alarming rate.
Last year, the U.S. economy expanded by under two percent. Over the last seven decades, gross domestic product (GDP) in the U.S. averaged 3.4 percent growth. In the 21st century, annual GDP growth met or exceeded that average just once. The president, not without reason, celebrated the 2.6 growth rate for 2017’s second quarter. Economists once regarded the figure we welcome now as a sign of underperformance. The sclerotic new normal directly relates to the new normal of one in five dollars directed toward health care.
Last year, for the first time, Americans spent more than $10,000 per person annually on health care. That we don’t direct that massive amount on video games or popsicles or ringtones speaks well of us. Our health is a serious matter, and should command a serious amount of money. But we damage the health of the economy when any one area drains such a massive portion of our personal and public budgets.
The differences between what we spend and what everyone else spends drops jaws in both relative terms as well as absolute terms.
Americans spend more on health care than every other people on earth. Americans spend more on health care than every other people on earth, save for three nations, spends on everything. The more than $3 trillion spent annually by Americans on health care eclipses the gross domestic products of every nation not named China, Japan, and Germany.
The health care contributions of the average American more than doubles the average amount spent in the other Organization for Economic Co-Operation and Development (OECD) nations. We spend two times what Frenchmen spend and about three times the amount that Israelis pay. If Frenchmen and Israelis could not access excellent health care, or lived shorter, diseased lives, one could conceivably justify our added expense. But Frenchmen and Israelis live longer, healthier lives than Americans.
We can do better. We must do better if we wish to remain economically competitive.
The Obamacare status quo that some Democrats favor and the status quo ante that some Republicans favor both miss this point. But the American people get it. According to a July USA Today poll, just 11 percent favored leaving Obamacare intact while only 12 percent favored the Senate’s health care bill. The people want none of the above.
The official name of the Obamacare legislation, the Patient Protection and Affordable Care Act, seemed to grasp the need to control costs but little within the bill, which contrary to that title taxed medical devices and health-care plans, did. Not only did our health care woes predate Obamacare, but the various repeal-and-replace packages touted in Congress do little to rectify the problem of cost. Just as a life-threatening condition generally requires more than an aspirin, the health care conditions threatening our economy — and much else — require something bolder than tweaks and milquetoast changes.
Our health care system sees the bureaucracies of insurance companies, hospitals, and governments converge in a perfect storm of waste. We pay for care but get paperwork instead. Curing the system involves surgically removing the middleman mandarins as much as possible. Ways exist (see Social Security) of providing care without providing for an army of administrators.
In a broad sense, disincentivizing extravagance (e.g., through mandatory co-pays and deductibles, and rolling over funds in medical savings accounts), providing choice (e.g., through à la carte plans rather than mandating, say, pregnancy coverage for men), and allowing competition (e.g., through buying insurance across state lines) all figure to decrease costs. But no plan to make health care more affordable will pass in the Congress without also making health care accessible for those who can’t afford it.
A Pew Research Poll from earlier this year indicated that 60 percent of respondents believe the government bears responsibility to provide coverage. Just 38 percent reject the idea of the state providing health care. Given the reality of this consensus, Republicans making the perfect the enemy of the good figure to wind up with worse than what they think possible. (One might argue that this has already occurred, with red-faced Republicans holding their breath for a better Obamacare replacement bill.) Given the burdens of health care costs, Democrats aiming for universal coverage without a plan to drastically reduce costs figure to crash into hard reality as well.
How can the federal government provide a medical safety net and reduce the overall costs we pay as a society toward health care? Achieving these two seemingly contradictory goals ranks as the domestic challenge of our times. It also serves as the raison d’être of this series of articles.
Cutting taxes, erasing regulations, stimulus spending, or any other panacea from past playbooks to jumpstart growth amounts to very little in an environment in which one in five dollars goes to medical expenses. Until we restrain health care costs, the economy remains in restraints.
That’s no place for a free people.
Hunt Lawrence is a New York-based investor. Daniel Flynn is the author of five books.