Social Policy in Ontario

Why health reform is good news for the U.S. economy

Posted on July 2, 2012 in Policy Context

Source: National Post — Authors: Diane Francis

NationalPost.com – FinancialPost
Jun 29, 2012.    Diane Francis

One of my relatives is among the 130 million Americans with a pre-existing medical condition who, without adequate healthcare insurance, could face financial ruin if his disease recurs. Roughly half of the personal bankruptcies in the United States are due to excessive medical bills.

He was downsized recently and since then has postponed vacation plans, buying a vehicle and generally battened down the hatches financially. So have millions more because, before this week’s Supreme Court decision to uphold President Barack Obama’s health reforms, people without employer-paid medical benefits could only get federal coverage for two years, then were cast adrift without insurance.

Naturally, in the noisy U.S. political arena the usual suspects, on both sides of the aisle and issue, are claiming that the decision is energizing their base. The decision will play into both their narratives so little will be changed politically.

All I know is that a Rubicon has been crossed and now whatever the opposition proposes had better address the anxiety and needs of the populace. Many are already benefitting from the implementation of this legislation that has been underway since its passage months ago.

Republicans are about to realize that only by extending the healthcare safety net (governments already pick up 50% of costs) can spending be reduced and the economy can recovery faster.

Not surprisingly, the news was greeted with relief in my family, and they will now be able to take a vacation and go out to eat. This is the direct effect of social safety nets: When the biggest fears people have are removed, spending and investing will result. Job growth will accelerate and, coupled with $3-a-gallon gasoline this summer, it might be very unwise to bet against the incumbent this fall.

The good news is that, win or lose, President Obama has succeeded, after decades of attempts, in providing the type of health care the rest of the developed world provides. Even if Mitt Romney wins the presidency and convinces Congress to repeal this legislation, something else just as effective and generous will have to take its place.

Universal health care is not just smart and fair social policy; it is also smart economic policy.

It works this way: If a worker in Canada or Europe or Japan loses his or her job, it’s a psychological and income blow. But if an American worker loses his or her job, the family faces financial ruin if sickness strikes any member because they are without health care coverage. Worse yet, if a major illness is diagnosed during a period of unemployment, a worker becomes unemployable, bringing about a life sentence of poverty.

This reality is why, in large measure, Americans have dramatically deleveraged and savings rates have soared since the collapse of its economy in 2008. And that pent-up spending potential won’t change overnight but is in stark contrast to other economies during this difficult period.

Romney can pledge repeal to his Tea Party, but the House of Representatives, the Senate, the President and the Supreme Court have all blessed this legislation. And, to boot, it was based in large measure on a similar scheme that Romney as Governor of Massachusetts enacted.

Instead of saying congratulations, Romney issued a call to arms to try and energize the extremists in his party so they don’t question his affiliation. But his alternative must achieve what Obamacare addresses:

1. The U.S. spent 16.2% of its GDP on health care plus up to 3% more on litigation concerning medical bills while other countries spend 10% and nothing on litigation because bills are paid by everyone. Lawsuits to recoup medical costs will slow because of Obamacare.

2. People with serious illnesses are uninsurable and are stuck in jobs they cannot leave or remain unemployed because they are unemployable. This will end if everyone’s covered.

3. Tens of millions of uninsured people in the U.S. end up with health problems that become a drain on society and economy. Under this reform, the 50 million uninsured people, mostly young healthy people, will have to be insured or pay fines, which will reduce overall costs because the paying base will be spread over the entire population.

4. Doctor, nursing, hospital and drug costs are out of control in the U.S. because of litigation and greed. American doctors over-service those with health insurance and fear of litigation has led to over-prescribing, testing and excessive costs. That fear has been removed.

The next step will allow patients to directly access coverage through state-run health care exchanges. They will have to compete in a new environment. Now it is illegal for them to be denied coverage for medical treatment, or be charged more due to health problems. Forcing the exchanges to compete will save costs or result, more likely, in disintermediation and governments becoming the insurers, as is the case in Canada and elsewhere.

Despite an irrational hatred of governments, America’s private-sector health experiment has failed abysmally and is on its way out. Governments outside the U.S. deliver medical care better and cheaper. The proof exists all over the world, except in the minds of partisans who would defend the indefensible.

< http://opinion.financialpost.com/2012/06/29/why-obamacare-will-help-with-the-u-s-economic-recovery/ >

Tags: economy, Health, ideology, poverty, standard of living

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