White House Council of Economic Advisers Releases Report on Impact of Health Care Reform

As a White House press release states, President Obama has articulated an ambitious agenda for health care reform -- containing cost while maintaining quality and choice, and providing affordable care for all Americans. Even though the President has ruled out a health reform bill that provides for single-payer coverage -- which would cut costs most effectively -- it's clear he's serious about providing some form of universal coverage. Last week, the White House Council of Economic Advisers released a comprehensive report detailing the potential economic gains from achieving significant reform, while also addressing the risks to the economy of maintaining the status quo. Click to download a copy of the report (pdf).

The key finding of the 56-page study is that the benefits of reform would be substantial. For example, health care reform that truly “bends the curve” in costs could boost Gross Domestic Product by nearly 8% in 2030. For a typical American family of four, health care reform could result in an additional $10,000 in income by 2030 than they otherwise would have enjoyed.

According to the CEA report, Health care expenditures currently account for 18% of our nation’s GDP and if we remain on our current path, health care spending is expected to reach 34% -- over a third -- of GDP by 2040. Rising health care costs are contributing to the deficit and undermining the ability of our small businesses to compete in the global economy. For working Americans who rely on employer-sponsored health insurance, rising costs mean that an ever greater proportion of their compensation comes in the form of health benefits rather than take-home pay. And rising premiums mean more money out of their pockets, too.

In New Mexico, for example, the average annual premium for employer-sponsored family coverage rose from $5,587 in 1996 to $11,834 in 2006.

The main findings of the report:

--We estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2 percent in 2020 and nearly 8 percent in 2030.

--For a typical family of four, this implies that income in 2020 would be approximately $2,600 higher than it would have been without reform (in 2009 dollars), and that in 2030 it would be almost $10,000 higher. Under more conservative estimates of the reduction in the growth rate of health care costs, the income gains are smaller, but still substantial.

--Slowing the growth rate of health care costs will prevent disastrous increases in the Federal budget deficit.

--Slowing cost growth would lower the unemployment rate consistent with steady inflation by approximately one-quarter of a percentage point for a number of years. The beneficial impact on employment in the short and medium run (relative to the no-reform baseline) is estimated to be approximately 500,000 each year that the effect is felt.

--Expanding health insurance coverage to the uninsured would increase net economic well-being by roughly $100 billion a year, which is roughly two-thirds of a percent of GDP.

--Reform would likely increase labor supply, remove unnecessary barriers to job mobility, and help to “level the playing field” between large and small businesses.

Clearly, we cannot afford to do nothing. Our job is to keep the pressure on so that the for-profit health care sector doesn't get to call all the shots. If they do, we may well end up with something even worse than we have now.