Monday, June 08, 2009

Do Healthcare Costs Make US Business Uncompetitive?

What sort of analysis would make you conclude that a sector of the US economy accounting for 17% of GDP requires radical, forcible restructuring?

If someone told you that the sector's costs, as inputs to other parts of the US economy, were inhibiting US competitiveness on a global basis, what evidence would you require to believe that contention?

Friday's Wall Street Journal featured an article by Betsy McCaughey, the now-legendary figure who is credited with having derailed HillaryCare in the 1990s. She was a lieutenant governor of New York who switched parties, left the field of political offices and now runs a health-related concern to reduce deaths from infection.

Responding to the current administration's claim that US healthcare costs are an economic burden on American business which must be forcibly restructured, Ms. McCaughey offered rebuttals to five claims by the administration.

First, Ms. McCaughey correctly dissects the administration's claim that because Medicare is in financial trouble, all Americans must be put on a federally-mandated healthcare 'diet.' It's a non-sequitor.

If anything, Medicare's and Medicaid's problems suggest they should be fixed prior to giving the federal government any further role in healthcare.

Next, Ms. McCaughey notes that the rate of increase in healthcare spending has actually fallen in the past five years, to a 6-7% range, from 13% in 1980. She notes an apple-to-oranges comparison by the current administration alleging that premiums have risen, writing,

"The real cause is the declineing share of care paid for out of pocket (down to 15% today from 33% in 1975). Auto-insurance premiums would also skyrocket if coverage suddenly included oil changes and tune-ups."

Regarding the alleged added 'burden' of healthcare spending today by families, the author notes that, since 1960, four budget items have accounted for a little over half of American family spending- food, energy, housing and healthcare. These made up 53% of the 1960 average household budget, and 55% today. She goes on to contend that Americans spend more for healthcare in part because they can afford it, and they "get more for it" than do Europeans using state healthcare systems.

Ms. McCaughey revisits, again, the tired old argument that Euopean state-run healthcare is cheaper than that in America. She cites statistics on medical innovation in America, and the rising rates of surviving various health problems, such as breast cancer or heart disease. As she notes,

"If you had a heart attack in the 1980s and made it to the hospital you had only a 60% chance of living a year. Now your chance is over 90%. No one wants 1980s medicine at 1980s prices. And in 10 years, no one will want 2009 care."

Finally, she tackles the economic argument that we need to cut healthcare spending in order to save American jobs. She writes,

"At a time when the economy is ailing and the president is bailing out industries to protect jobs, his advisers recommend shrinking the health-care industry. It currently provides 1.4 million jobs- 10 times the U.S. work force of General Motors and Chrysler."

Ms. McCaughey provides some persuasive arguments not to attempt to pass an omnibus healthcare bill this summer, as the Democrats are so eager to do.

But, beyond her excellent refutations of the White House's report on the healthcare situation, there remains a fundamental lack of a convincing, compelling business case to sustain the contention that American medical costs currently cost American business growth, profits, or jobs.

We have no trend information demonstrating the contention. Nothing about comparative medical expense levels and corresponding health indicia across the globe. Nothing relating healthcare spending, health, and business growth, profitability or job growth.

Nothing has been presented which clearly demonstrates a significant decline in American economic performance traceable to, and only to, rising healthcare costs.

Without this type of evidence, who would be foolish enough to radically, but vaguely, restructure our healthcare sector?

Ironically, this drive by the Democrats to federalize healthcare may, and probably will, only succeed in putting larger costs and clumsier procedures into practice, while resulting in a less-healthy American population.

This is progress? Or change you would want?

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