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Healing U.S. Healthcare

Author: Toni Johnson
January 7, 2009


With the onset of the global economic crisis, some experts feared health reform would be knocked off the incoming administration's agenda, but instead interest has intensified. "Many people say the government cannot afford a big investment in health care," writes Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology. "But this represents a false choice, because health care reform is good for our economy." (NYT) President-elect Barack Obama agrees, noting in early December that health care "is part of the emergency," and health care reform has to be woven into the overall economic recovery plan (Atlanta Journal-Constitution). The stimulus proposal currently being discussed includes government aid for health care (NYTimes) costs to employers, workers, and states.

Health care reform discussions focus largely on improving access and lowering costs. Obama's health care plan would create a public-sponsored insurance plan similar to the one provided by the government to members of Congress. It targets individual buyers and small businesses, two segments that have had trouble affording private insurance. Nearly 16 percent of the U.S. population has no health coverage. Insurance companies have balked at the public insurance plan, saying it would underpay doctors like other government health plans and shift costs to private insurers (NYT). Instead, the insurance industry wants the government to mandate that everyone must have health insurance in exchange for a pledge not to refuse coverage regardless of health status. Obama's plan would mandate the industry cover everyone without requiring that everyone obtain insurance. That could allow some people to wait until they are sick before buying, the industry argues.

The value of rationalizing the U.S. health care sector has been accepted for some time as an important step in keeping U.S. industry competitive, as this Backgrounder explains. C. Fred Bergsten, director of the Peterson Institute for International Economics, and Raymond C. Offenheiser, president of the charity Oxfam America, say universal health care can provide U.S. workers with a safety net against the impact of trade deals (Miami Herald). Princeton economist Ewe Rheinhardt says the health care sector will soon be the largest in the U.S. economy, making it a good taxpayer investment (NPR). He and others say that past efforts to pump federal stimulus money into public works projects - dams, roads, bridges - often wound up missing the crisis, as the projects (and stimulus) get caught up in local planning and bidding battles. But shifting to health care investment, writes BusinessWeek columnist Chris Farrell, feeds a sector of the economy already growing, and would relieve a major source of economic insecurity "for anyone handed a pink slip during the recession."

A November 2008 Kaiser Foundation report notes that access to employer-sponsored health insurance has been on the decline (PDF) among low-income workers. Meanwhile, the fiscal crisis is reducing the number of people who can pay (BusinessWeek) their doctor's bills and insurance premiums. Even if the widely acknowledged systemic problems are left aside, these problems will worsen during a recession. The situation could push more people into government health care programs such as Medicaid. President-elect Obama's economic stimulus proposal would allow laid-off workers without insurance to apply for Medicad for the first time. The Democratic victory in November has ignited a debate to what extent U.S. health care will become a government-run program. Pete DuPont, a billionaire former Republican presidential hopeful, warns of a coming "Europeanizing" of American health care (WSJ). But analysts suggest the European-style "single-payer" system is now virtually off the table (LAT).

Obama's health plan hopes to tackle rising costs by allowing importation of cheap medicines from developed countries and increase access to new generic drugs as a means to lower costs. This would cut into drug company profits, however, and will be certain to meet opposition. And as this CFR Backgrounder points out, some experts also worry importing more drugs from other countries will challenge the already taxed Food and Drug Administration, the agency charged with drug safety. Expanding the number of people covered also presents another challenge: The United States has a shortage of doctors (NYT) and other medical professionals.

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