Health Care for the Economy

I have recently compiled my columns from The Seattle Times from 2000 to 2004.

I am re-printing below one of them which I thought was of particular interest.  It ran in October 2003. We would have to change only a few minor numbers to make it current today.

We publish this as an indicator of why we need to press for reform.

Guest columnist

Health care for the economy 

By Kathleen O’Connor

Special to The Times, October 14, 2003

What if health-care reform were a straightforward question of jobs, America’s national economic interest and our international competitiveness? It is. Just look.

Here’s the quick end of the story first. Administrative expenses devour a 150-percent larger share of America’s health-care spending than our competitors in the Economic Group of Eight.

If we reduced this to only 25 percent more on non-care expenses than the worst of our competitors, the American economy would save $300 billion every year. That’s twice the annual tax savings claimed for the Bush tax cuts.

Put another way, these savings happen if our level of administrative efficiency were just 25 percent worse than most of the rest of the world. If we achieved equal efficiency, we’d save $400 billion a year.

Best of all, these savings wouldn’t reduce spending on care delivery or medicines, leaving our quality of care and technological edge unaffected.

How many jobs would $300 billion savings create? How much more competitive would our products be?

How much more productive would we be as a nation, if we had generally healthier people who did not live in fear of losing their health-care benefits or of facing medical bankruptcy?

Health-care cost is the albatross hanging on the neck of the American economy. If companies have 10 to 20 percent annual health-care increases, they certainly aren’t going to give raises or add new jobs.

We spend 14 percent of our gross domestic product on health care, but we don’t cover everyone. Our competitors spend about half that and manage to cover all their people. We spend $1.4 trillion, or nearly $5,000 for every man, woman and child, and leave over 40 million hard-working Americans without coverage. In return for that investment, we ranked 37th in the world for our health outcomes, below Singapore, Chile, Cyprus and Costa Rica, according to the World Health Organization in 2001.

Actually, we don’t spend $1.4 trillion on health care; only about $825 million actually goes for patient care. Take a look.

About 31 cents of every American health-care dollar goes for administration. Another 10 cents goes for other “non-care” expenses. That’s a total of 41 cents for non-care expenses, according to a study in the New England Journal of Medicine in August. (This does not include medical-malpractice costs, which would add another 4 or 5 cents). The worst case among our competitors is about 15 cents per dollar for non-care expenses. That means the part of our health-care dollar spent on bureaucracy is two and a half times more than our competitors. Put another way, we are 250 percent less efficient.

So, if our administrative costs were reduced to 20 cents per dollar (versus 15 cents elsewhere), we’d save $300 billion every year. If we equaled the administrative efficiency of our competitors, we’d save $400 billion a year. The $825 billion we currently spend for patient care would remain unchanged.

This is theoretical, of course. Much of our political establishment and many deep-pocket special interests have huge stakes in the status quo. These savings are not an abstraction. All our economic peers and competitors can do this.

But what happens when we try to discuss this? The knee-jerk “socialized medicine!” mantra. That universal coverage means “socialized medicine” is hogwash.

Most of our competitors give more control for private-sector care providers than we do and they rank higher in health outcomes. Even Canada. Our health care could just as easily be called “privatized socialism” because private entities (versus the government) dictate which doctors we can see, how much they can charge and the kinds of medicines they can prescribe. Does that happen in Canada, France, Germany or Japan? Of course not.

This private-sector bureaucracy is the major culprit and significant reason for the economic strains on our businesses and our provider practices.

Think about it. More jobs are going overseas through “outsourcing.” We have lost 2.5 million manufacturing jobs since 2000. With 25 to 30 percent of their payroll going for health insurance, companies will do more outsourcing. Higher health-care costs mean more job creation over there — not here.

What’s happening here? Loss of domestic jobs and no wage increases because of health-care costs. Our products are also less competitive, with a larger share of costs going to health care than is the case with our competitors.

When we talk about health care, all we do is talk in ideologically driven terms rather than focus on what is economically viable. Change is summarily dismissed as “socialized medicine,” which derails the real debate.

How long will we accept name-calling to protect the status quo? Are you better off with your health care than you were 10 years ago? Are you better off economically than you were five years ago? It’s time we changed the terms of the game.

About Kathleen

Kathleen O’Connor: 30+ year health care consumer advocate, non-profit executive and author. For more information about Kathleen, please see "About" on the main content bar above.
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