How the Affordable Care Act Helps the U.S. Economy

The current healthcare system burdens the overall economy because it is far too expensive compared to the health benefits it delivers

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David Brodwin is a cofounder and board member of American Sustainable Business Council.

This week, the Supreme Court heard arguments over whether President Obama’s healthcare legislation is constitutional. It’s easy to get lost in tedious legal details, but let’s not neglect the critical patient at the heart of this case: the U.S. economy. If we don’t take bold steps to reinvent our healthcare system, that patient will decline and die.

The current healthcare system threatens our prosperity in three ways: It burdens the overall economy; it undermines individual businesses and the jobs they provide; and it saps the productivity of American workers. These threats confront both those of us who have insurance and those of us who don’t.

[See a collection of political cartoons on healthcare.]

Our current healthcare system burdens the overall economy because it is far too expensive compared to the health benefits it delivers. In fact, the United States spends about 50 percent more on healthcare than any other developed country (as a fraction of our total national economy) and we get less for it on the measures that matter. What matters is how long people live and how healthy they are, not how many coronary bypasses were performed. As a former management consultant, I can tell you that no CEO would tolerate a division that spent 50 percent more than its competitors, and didn’t have much better results to show for it.

In the United States, the total cost for healthcare is around 16 percent of Gross Domestic Product, known as GDP. This includes what we pay directly to insurance companies and doctors, and what we pay indirectly to Medicare and other programs. Simply put, for every dollar you spend to purchase something, whether a loaf of bread or a new car, 16 cents goes to healthcare. Most other developed countries pay far less, about 9-12 percent of GDP. This includes many countries where people live longer and with less disability. The cost difference, roughly 5 percent of GDP, works out to $750 billion dollars every year, more than half the annual federal deficit!  

[See a collection of political cartoons on the economy.]

If we could recapture the money that is now lost to inefficiencies in the healthcare system, we could strengthen our economy tremendously. Whether we put this money toward reducing the federal debt or improving our schools or advancing scientific research, every dollar could be put to work in ways that make America a better, tougher competitor.

Every U.S. company takes a beating from soaring healthcare costs. American manufacturers pay directly for the healthcare of their employees; their competitors in China, Japan, Germany, and most other countries don’t. American companies must pass these costs on to their customers, which makes their products more expensive. The healthcare cost built into each new General Motors automobile is about $1,200; healthcare now is the single most expensive “part” in a new American car. This extra cost can spell the difference between gaining market share and hiring--or losing market share and laying off workers.

[Photo Gallery: Supreme Court Hears Health Care Reform Arguments.]

Small businesses suffer more than big businesses from our inefficient healthcare system. Any small business owner will confirm that soaring premiums afflict their bottom line. A national poll of 500 small business owners found that the “cost of health coverage” ranked No. 2 on their list of important problems, second only to “weak customer demand.”

Some of the damage from our healthcare system is more subtle, but it hurts nonetheless. When someone hesitates to start a new business because she can’t risk a gap in coverage, America loses jobs. When someone can’t bring his “best game” to work because he can’t afford medicine he needs, productivity falls.

America’s healthcare system is clearly broken. Although it offers the latest and greatest in medical technology it is among the worst from the standpoint of the care we get versus the care we pay for. Some politicians want to leave the inefficient system in place. But this would just prolong a system that costs too much per person and consumes too much of America’s wealth. To solve this big problem we need bold changes, starting with universal coverage with an individual mandate, as provided by the Patient Protection and Affordable Care Act. This is a first step toward inventing a system with which we can both live and prosper. It breathes new life into our economic future.

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