Health Care as Economic Stimulus

America’s inefficient healthcare system is a drag on the economy. Not only are we not getting the best bang for the buck—we spend more than almost any other industrialized nation, but have outcomes that rank well below our counterparts—our reliance on employer-provided insurance increases the cost of doing business.

Consider the troubles of the American auto industry. The big three all face major revenue shortfalls, much of it created by their own inertia and inability to read the market.

But the American car companies also pay a premium that their chief competitors in Japan do not. As Edward McClelland wrote on in November, healthcare costs are among the chief reasons that per-hour labor costs are about $30 higher in the United States than in Japan.

GM, for instance, is “the largest private purchaser of healthcare in the US,” spending “$4.75 billion a year on retirees’ medical coverage.”

“That included full benefits for families of workers who took their place on the assembly line right out of high school, and took the 30-and-out before they turned 50,” McClelland writes. “It’s one reason the company is $48 billion in debt.”

Not that it’s the workers’ fault. On the contrary, the Communist scare of the late 1940s scuttled Harry Truman’s universal healthcare proposal, leaving it to workers and management to craft an arrangement that seemed to work fine—that is, until costs started to skyrocket and cheaper imports began to flood the market.

What we are left with now, as McClelland writes, is a healthcare system that works as a disincentive for the Big Three to move away from what he calls “that huge iron”—the SUVs and trucks that have the highest profit margins and help offset the added costs of healthcare.

“GM spends an average $72 an hour on labor, including wages, health benefits and pensions,” he wrote. “Non-union Toyota plants spend $42 an hour. Toyota hasn’t been building cars here long enough to be stuck with the hospital bills of nonagenarian retirees. The company has plenty of elderly veterans back home—the Japanese are the longest-lived people in the world—but guess who pays for healthcare in Japan? The Japanese government. As a result of providing its workers with health benefits that everyone in this country should be getting, American automakers pay over $2,000 more in labor costs on every car they make. The best way to overcome a nut like that is to build big vehicles that you can sell for a big profit.”

That is a lot of money to make up, especially when American cars still fetch less than similar-sized Japanese cars, but continue to be plagued by a reputation for lesser quality.

A single-payer system, of course, would relieve the auto industry of the burden of healthcare costs—as it would the rest of American business. Health insurance expenses, after all, “are the fastest growing cost component for employers,” according to the National Coalition on Health Care, a nonprofit research group.

Premiums for employer-based health insurance rose 5% in 2008, the NCHC says, with smaller firms being hit the hardest. Employer-based health insurance premiums increased 120% since 1999, almost triple the rate of inflation and six times cumulative wage growth.

The problems that businesses face are nothing, however, when compared with the dire consequences many patients and patients’ families deal with. Health costs are the leading cause of bankruptcy with 50 percent of all filings tied in some way to medical expenses, the NCHC said. A Harvard University study found that the average out-of-pocket medical debt for those who filed for bankruptcy was $12,000 and that 68% of those who filed for bankruptcy had health insurance.

Another survey found that more than 25% said medical debt led to housing problems, “including the inability to make rent or mortgage payments and the development of bad credit ratings,” the NCHC said. “About 1.5 million families lose their homes to foreclosure every year due to unaffordable medical costs.”

Other Western nations do not face these kinds of problems, primarily because most have some form of universal healthcare, if not a single-payer or socialized system. We spend about $480 billion more than we need to, when compared with other countries, “costs (that) are mainly associated with excess administrative costs and poorer quality of care,” the NCHC says.

Reforming our healthcare system, therefore, should not be just a long-term goal or something to put off until we resurrect our economy. Fixing our inefficient system just may be a necessary part of the remedy.

Hank Kalet is a poet and online editor for The Princeton Packet newspaper group. Email and see his blog, Channel Surfing, at

From The Progressive Populist, March 15, 2009

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