Health Care Reform - Our Take
October 18, 2009 – The Business Round Table recently commissioned a report from Hewitt Associates to explore the cost of ‘doing nothing’ when it comes to health care reform. Here are the key findings:
· Without significant marketplace reforms, if current trends continue, annual health care costs for employers will rise 166 percent over the next decade, from $10,743 per employee today to $28,530 by 2019. Note that health care costs for employers have risen from $4,918 in 2001 to $10,743 (+118%) in 2009.
· These runaway costs, combined with a $56 billion cost shift to payors from uncompensated care, would cripple the employer-based system that currently provides coverage for the majority of Americans and their families.
· About $2.4 trillion was spent on healthcare in 2008. If nothing changes, by 2019, total health care spending will reach $4.4 trillion, consuming more than 20 percent of the U.S. Gross Domestic Product.
· We need better outcomes. The National Academy of Sciences estimates that up to 98,000 people die in U.S. hospitals each year as a result of medical errors. HealthGrades puts the number at 195,000.
· About 45.7 million Americans were without medical insurance in 2007 and suffered the consequences of inadequate healthcare.
That healthcare reform will result in increased spending is not controversial. No one is debating this point. The Kaiser Family Foundation says that total health care spending for full-year and partial-year uninsureds would add $122.6 billion to the annual cost of health care in the U.S. if this population became insured. The Congressional Budget’s analysis of the Baucus healthcare bill concludes that:
Estimated Budgetary Impact of the Amended Chairman’s Mark According to CBO and JCT’s assessment, enacting the Chairman’s mark, as amended, would result in a net reduction in federal budget deficits of $81 billion over the 2010–2019 period. The estimate includes a projected net cost of $518 billion over 10 years for the proposed expansions in insurance coverage. That net cost itself reflects a gross total of $829 billion in credits and subsidies provided through the exchanges, increased net outlays for Medicaid and the Children’s Health Insurance Program (CHIP), and tax credits for small employers; those costs are partly offset by $201 billion in revenues from the excise tax on high-premium insurance plans and $110 billion in net savings from other sources. The net cost of the coverage expansions would be more than offset by the combination of other spending changes that CBO estimates would save $404 billion over the 10 years and other provisions that JCT and CBO estimate would increase federal revenues by $196 billion over the same period.
What is being left out of the debate, and coverage of the debate in the media, is the question about whether the return on this investment would be worthwhile. Hewitt Associates states that “there is additional evidence that the economic benefits of this increased spending in terms of improved health status, longevity, and productivity would result in a positive return on this investment.” And if it is right about its forecasts of annual costs for employers over the next decade if reform is not implemented, then the ROI becomes even more poignant.
Opponents of the healthcare bill complain about the costs, pointing to the country’s mounting debt. On this point they are outspoken, if not entirely boisterous. Curiously, they are silent on the costs that the wars in Iran and Afghanistan have tallied over the last eight years.
The National Priorities Project states that to date, $915.1 billion dollars have been allocated to the wars in Iraq and Afghanistan. In addition to this approved amount, the FY2010 budget shows a $130 billion request for more war spending. This would bring total war spending in Iraq and Afghanistan to more than $1 trillion.
On Meet The Press over the weekend, Senator Jon Kyle (R-AZ) was questioned on this point:
David Gregory: It is interesting Senator Kyle in terms of this kind of moral imperative. You and other Republicans have said this healthcare reform should be opposed and one of the major reasons you cite is how much money it costs – how much it could potentially add to the deficit although the President says it will be deficit neutral. And yet when you talk about the war in Afghanistan and that the commanders should have more of their troops, I have never heard you say that should be deficit neutral – that war costs should somehow not break the bank. Why is that disparity there?
Kyle: David, no country can afford to skrimp and save, or try to win a war on the cheap. The President himself has said that the war in Afghanistan against these terrorists who killed over 3,000 Americans on September 11, 2001, is a war of necessity. You have to win it. And Americans throughout our history have sacrificed when a war has called for us to do that.
David Gregory: And is it a necessity to tackle the fact that there are more and more Americans who die because they don’t have access to health insurance?
Kyle: I’m not sure that it is a fact that more people die because they don’t have health insurance, but because they don’t have health insurance care is not delivered in the best and most efficient way. Republicans have a lot of good ideas….we have very good ideas about how to tackle this problem one piece at a time and basically regain the trust of the American people by taking one step at a time rather than saying that we have to have a trillion dollar bill. Yes that will hurt our deficit. Remember we just had the figures come out earlier this week – a $1.4 trillion deficit, more than all of the last four budget deficits combined. So when we are spending on war, and when we are spending on other things we need to have, we don’t have to spend as much on health care. We can do it one step at a time, to target the problems we have with targeted solutions.
Kyle’s responses are generally endorsed and championed by opponents to the health care bill. It is worth noting that Kyle’s notion of ‘taking it one step at a time’ where the war takes priority over healthcare is a garden variety of supply-side economics rationale. Where the choices are defense budgets and social reform, the virtues of a massive deficit is that it forces policy makers into a dilemma: cut defense or cut social programs. In a time of war, the chances are pretty high that social programs will be cut.
This was the case in Reagan’s era, where the threat of Russia (aka, ‘The Evil Empire’) was an ultimate concern. David Stockman, Director of Office of Management and Budget under Reagan’s administration is on public record acknowledging as much. And it is the case today, in an even more nebulous manner since our war is not against any state, but against a tactic – pace the ‘war on terror.’ Kyle is obviously comfortable with the budgets and implied deficit spending where it is being used to support defense industry initiatives. It stands to reason that most opponents of the healthcare reform legislation would fall into that category.
These folks point to the 3,000 people that lost their lives on September 11, 2001 as emotional fodder for their argument. People seem to buy it, talk radio perpetuates it, and the mainstream media doesn’t scrutinize it. What about the 30 million to 45.7 million Americans that are not insured? Surely more than 3,000 each year, each month, and each week are mortal victims of lack of healthcare insurance and care. Note that we use a range when referring to the uninsured in acknowledgement of the debate over what the real numbers is. The most objective analysis we are aware of is provided by FactCheck.Org:
“The official Census figure for 2007 was actually 45.7 million persons in the U.S., but that figure includes an estimated 10 million who are not U.S. citizens, including 5.6 million who are here illegally, according to the National Institute for Health Care Management Foundation. That still leaves about 35.7 million U.S. citizens without health coverage in 2007, well above the president’s figure (in a recent speech). And hours after the president spoke, Census released new figures for 2008, showing the total number of uninsured went up slightly, to 46.3 million.”
The bottom line is that opponents of healthcare reform and the reasonable investment required to overhaul our healthcare system either have an agenda inconsistent with the best interests of this country, or are totally uninformed at this point. With all of the misinformation out there, it is easy to understand the latter – pace FactCheck.Org’s article, Twenty Six Lies About H.R. 3200. Apparently, even our congress people are passing on chain e-mail letters as fact.
By the way, the number one contributor to Jon Kyle is the Club for Growth (a 501(c)(4) political organization), which just announced that it is launching a new television ad aimed at U.S. Senate Majority Leader Harry Reid. It says the ad is part of the Club’s nationwide $1.2 million campaign to highlight the dangers of government-run healthcare and focuses on the unsustainable fiscal policies of Congress and the Obama Administration. Organizations like the Club for Growth have, and continue try and maintain contradictory positions of ‘fiscal conservatism’ with advocacy for the Bush tax cuts (it ran ads against Sectors Voinovich of Ohio, Snowe of Main and Chafee of Rhode Island after they objected to certain aspects of Bush’s tax cuts).
There isn’t much point to spending time on the Club for Growth, other than to note it is a perfect example of the ultimately incoherent opposition to health care reform basing its opposition as one steeped in concern about its reliance on unsustainable fiscal policies. It is conventional wisdom at this point, amongst most economists that Bush’s economic policy resulted in record deficits, driven by economic policies advocating leverage at the consumer level, leverage at the corporate level and a previously unparalleled level of draw downs on foreign debt – all hardly sustainable economic policies. But it is the Club for Growth that wants to make those policies permanent.
In contrast to organizations like the Club for Growth, the Business Round Table doesn’t have a partisan axe to grind. It is an association of chief executive officers of leading U.S. companies with more than $5 trillion in annual revenues and more than 12 million employees. Member companies comprise nearly a third of the total value of the U.S. stock markets and pay more than 60 percent of all corporate income taxes paid to the federal government. Annually, they return more than $167 billion in dividends to shareholders and the economy. The report it presents suggest severe impacts to this country’s business sector if we fail to move forward on health care reform.
Yes, it will require additional expenditures. But there is a return on investment which is tangible, and arguably much more directly relevant to American citizens than the war on terror. This is not to make light of September 11. It is only to emphasize the importance of more than 30 million Americans without access to insurance, the implications on 30 million Americans receiving their primary point of healthcare at the emergency room to the healthcare premiums of those of us that are paying for healthcare insurance, and the forward-looking implications to our business sector if employers are expected to deal with a 166% increase in employee healthcare costs by 2019.
