Universal Health Care Series: The Economic Argument

This post is Part II in a series exploring reasons to support universal health care. You can find the other parts of the series here.

Number crunchers consider this:

  • The United States spends more than any other country in the world on health care (16 percent of the national GDP).
  • For doctors that would like to volunteer, bureaucratic obstacles such as burdensome paperwork and high license fees up to $1000 from state medical boards prevent many doctors from alleviating the overcrowding in free clinics and government community health centers.
  • Each dollar spent on ensuring people are healthier and more productive would generate $20 in benefits.
  • In 2006, U.S. health care spending was about $7,026 per resident and accounted for 16% of the nation’s Gross Domestic Product (GDP). Total health care expenditures grew at an annual rate of 6.7 percent in 2006, a slower rate than recent years, yet still outpacing inflation and the growth in national income.
  • Analyses of data from the 2005 Medical Expenditure Panel Survey indicate that total medical spending is much lower when coverage is provided by public health coverage such as Medicaid when compared to private health insurance coverage.
  • Over the last 25 years, health systems’ average total profit margins have remained reasonably stable at around 5 percent. About one-quarter of all US hospitals, many of them safety nets, have reported negative margins, and continually teeter toward failure.
  • Health care costs are expected to rise by 10 percent in 2009.
  • California HMOs earned over $4 billion in profits in 2007 and spent $6 billion in administrative costs such as CEO salaries rather than using the revenue to reduce insurance premiums for the consumer.

Few individuals and organizations benefit under the current health care system except certain CEOs. I am not going to touch the issue of executive compensation; however, per capita costs have risen faster than the rate of inflation, leaving more families behind. While there is a moral imperative to care for the wellbeing of others, increasing access to health care can not be considered without a consideration for the economic impact of a change.

The major objection is that universal health care will simultaneously decrease efficiency and choice while increasing costs. Universal coverage does not mean writing a blank check to every American. Rather, creating an umbrella of health coverage rather than a patchwork quilt takes advantage of economies of scale for purchasing and well as facilitating the development and implementation of best practices from a central authority.

The economic savings emerge in other areas of society as well. A healthier population is economically more productive because they are fewer days missed due to illness. Small business is likely to flourish because business owners do not have to fear covering employee health care costs. Increasing efficiency through technology, making prevention and health promotion a central focus of health care, and encouraging behavior change will also help to cut costs.

As private industry has had a horrible track record of policing itself, universal health care is the most viable alternative for addressing the dual problems of gaps in coverage and escalating costs.

2 comments so far

  1. […] More: Universal Health Care Series: The Economic Argument […]

  2. […] Mason of Subject to Change correctly noted in The Economic Argument for Universal Health Care, the US system is the most costly worldwide at 16% of GDP. To keep things in perspective, we should […]


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