Thursday, November 5, 2009

How Would Cheap Healthcare Affect Our Economy?

This is the first of two posts on the philosophical (and largely internal) debates I'm having about healthcare's role in the American economy.

I was fortunate to have a father who, without college education, got on at Eli Lilly and worked his way up the chain. His income helped pay for my college, at least the portion that wasn’t covered by a scholarship financed from my college’s endowment, which held massive amounts of Lilly stock.

Thousands of Indianapolis families have floated in the same boat. Without Eli Lilly, Indianapolis is nowhere near what it is today. The Lilly Endowment is our philanthropic core, and the Lilly workforce is a staggering, though now dwindling, part of the Hoosier tax base.

And herein lies America’s demon.

When we assert that pharmaceutical companies are soulless, we are right philosophically if they are hosing their employees and depriving the dying of necessary medications. But what if the company is touted as one of the best places to work? What if the majority of the workforce is American, and those Americans share in the profits in the form of high wages, low mortgages from the Lilly credit union, and robust retirement accounts?

We all know whether a person identifies an industry as “bad” hinges mostly on whether he or she benefits from it. After all, we rationalize self-interest better than anything. This notion got me thinking more broadly about the horror of paying a lot for medical care.

America spends more per person than any country in the world. These estimates include money paid to insurance companies for premiums, as well as direct payments to all measure of medical providers, hospitals, pharmacies, and nursing homes by both individuals and the government.

To make healthcare cheaper for consumers will require more than eliminating waste. It will also require we pay insurance companies and medical providers less. Would we be right in thinking lost money means lost profits and probably lost jobs in those sectors? Absolutely. If so, could creating these savings actually hurt our economy in the aggregate?

This is what I know. America only has three of the top ten pharmaceutical companies in the world, but almost every individual medical provider in America, from the brain surgeon to the physical therapist is American (excluding some who might be working on VISAs, but that's not more than a few boatloads, literally). Also, I haven't found a single foreign-owned hospital corporation in America. Even the reviled health insurance industry (evil because many companies deny coverage outright or fail to honor legitimate claims) is mostly American.

In other words, when Americans overpay in the healthcare system, at least we overpay fellow Americans. If we stop the "overpayments," don't we leave to millions of consumers what to do with their savings? That’s certainly the entitlement of every American. But we have to ask….

Is there any reason to believe that lower costs in medicine will make it more likely Americans (or their governments) will save (thereby helping us pay off our massive debt to China)? What if they take their newfound funds and buy Chinese-made electronics or foreign cars? What if the greatest stabilizing force to our economy is having over a trillion dollars tied to our most recession-proof and almost exclusively "local" industry? Isn’t that better than spending it on telecom companies that are moving their entire workforces to India?

Seriously, some IU economics professors just released a report that said Indiana's job growth over the next few years will come principally from the government (public jobs), construction (public construction), and health fields. Only one of those three doesn't require government to cut a check to stir the economic pot.

While I understand the notion of paying too much to see no improvement in health outcomes, such as infant mortality, that’s an issue of allocation of resources and priorities. You can keep the total number of dollars low, and put more into prenatal care to improve results.

But from the larger economics perspective, whether we collectively pay “too much” for something often depends on the next best alternative for that money.

Yes, I know this is a hypothetical exercise, so no, I’m not saying let’s not do healthcare reform. Runaway costs hurt the ability for regular folks to get preventive tests that could save money in the long run while lessening human suffering, and the measure of our humanity is how well we care for our ill.

I’m just asking whether we are certain that any dollars taken from physicians, hospitals, and insurance companies will go to deficit reduction or something as valuable to the economy as having American businesses and their employees thrive?

Discuss amongst yaselves!


1 comment:

Akla said...

On the same note, much of what we pay for health care is for the massive paperwork for billing, insurance and such. If we were to eliminate such waste (say, all insurers use the same codes, reimburse the same amount for a given procedure, etc) we would not need hundreds of thousands of these coders and records people. A conundrum. Still, I would rather have the option of choosing where to spend my money than it being forced from me through drug companies (hospitals, insurance companies, whatever) that work to satisfy shareholders over providing quality solutions to real health problems.