OKPOLICY.ORG
Health care reform is in the news. We have the world’s most expensive health care system, but our health care outcomes are not that good and we still leave one-sixth of Americans under age 65 without insurance coverage. President Obama and the Democratic-controlled Congress are making this one of their many top priorities this year.
The possibility of reform raises many troubling questions. Will there be new taxes? Will current employer-provided benefits be taxed? Will government control health care decisions? Will private insurers be run out of the business? Will the federal deficit get even worse?
Whenever we consider significant public policy changes, it is reasonable to ask “What happens if we do nothing?” The Council of Economic Advisers, a White House agency charged with offering objective economic advice to the President, suggests that may be the worst alternative of all. Their new report forecasts the economic effects of health care reform and gives us some insight into the “do nothing” alternative. The Council finds that:
- Letting costs grow at the present rate stunts economic growth. By 2030, gross domestic product would be eight percent below levels we could expect if we achieve minor–1.5 percent per year–cost controls.
- Translated into personal terms, a family of four would see about $10,000 less income in 2030 under the current health care system than under one that controls cost growth.
- Uncontrolled health care costs reduce employment by about 500,000 per year.
- The current system is inefficient. There is no relationship between cost and health outcomes, and it costs society more to leave people uninsured than it would to insure them. Employer-provided insurance keeps people in jobs when they might have better opportunities elsewhere, and makes it difficult for small businesses to compete with larger ones.
The Council concludes:
The CEA report makes clear that the total benefits of health care reform could be very large if the reform includes a substantial reduction in the growth rate of health care costs. This level of reduction will require hard choices and the cooperation of policymakers, providers, insurers, and the public. While there is no guarantee that the policy process will generate this degree of change, the benefits of achieving successful reform would be substantial to American households, businesses, and the economy as a whole.
Keep in mind that the Council works for a pro-reform president. The report, however, is well-documented and does not advocate any particular reform.
As we learn more about specific reform proposals, most of us will see something we don’t like. Many will vocally and arduously oppose most of the proposals that are offered. As we weigh new options, however, we should never lose track of the risks of leaving the current system alone.
