Health Care Reform Is Needed Now More than Ever

With the U.S. economy's downward spiral still
accelerating and the federal government looking at its largest budget
deficits since World War II, some are saying that this is not the time
to expand health care coverage to all Americans.

But this is exactly the time for the Obama
administration to move boldly on its campaign promise to implement a
universal health care system.

Obama wants spending that stimulates the
economy in the short term, but he also wants to reduce the long-term
deficit problem after the economy recovers. This is exactly what health
care reform will do.

In the short run, health care spending, like
other government spending on goods and services, creates jobs and
generates income. This will help arrest the economy's downward spiral.

With the collapse of private spending, the
federal government must act as the consumer of last resort - hence the
vital importance of the $787 billion stimulus package that Congress
passed last week. Fortunately this package did contain at least some
health care stimulus. In included $87 billion for Medicaid payments to
the state governments, $25 billion towards helping unemployed workers
extend their employment-based health insurance after being laid off,
and $19 billion for health information technology.

But health care reform would do vastly more.
President Obama has proposed a reform that would, while keeping the
employer-based health insurance that covers most Americans, create a
public health insurance system for the 46 million that do not have
insurance. Large employers would be required to either pay into this
system or provide their employees with insurance that is at least as
good as the federal system. Individuals without insurance could buy
into the public system, and the federal government would subsidize
these payments so that they would be affordable for low-income
households and those without ties to the labor force.

The White House estimates that their plan would
cost $50-65 billion annually, but it would be better to spend much more
than this, with more federal subsidies to employers to cover uninsured
workers and improve existing coverage. As big as it may seem, the $787
billion stimulus bill passed by Congress amounts to less than 2.7
percent of GDP. This is not nearly enough to counteract our deep
recession: the Congressional Budget Office estimates the output gap
(i.e., how much output is below the economy's potential) at $2.9
trillion over the next three years.

Besides saving thousands of lives by providing
health care to the uninsured, and supplementing the fiscal stimulus,
health care reform has another huge advantage: it can drastically
reduce future federal budget deficits. The vast majority of our
government's long-term shortfall is due to exploding health care costs
in the private sector. These spill over to the public sector, which
currently finances about half the nation's health care costs. The
United States spends about twice as much per person on health care as
other high-income countries, and yet has worse health outcomes,
including life expectancy and infant mortality.

The main economic reason for this colossal
failure is that our system of private insurance and powerful monopolies
is vastly more wasteful and inefficient than the health care systems of
other developed countries. Insurance companies spend tens of billions
trying to insure the healthy, avoid the sick, and deny payment for
claims. Pharmaceutical companies take $350 billion of our health care
dollars for drugs that cost a small fraction of that sum to produce.

The Obama health care plan won't eliminate most
of these perverse incentives and waste - eventually we will need a
truly national, single-payer system like Medicare to accomplish that.
But it would be a big step in that direction, creating a nearly
universal insurance system and laying the foundation for a sustainable
system that can contain costs.

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