Lost in all the uproar over the U.S. Supreme Court's June 28 "Obamacare" ruling was the crucial link between health-care reform and the issue voters care most about: the economy. America's current health-care "system" isn't just an ungainly, costly, and unjust mess. It also undercuts the United States' ability to compete and win in world markets.
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Amid the debate over "American decline," this connection deserves a lot more attention than it's getting. To revive U.S. international competitiveness, the country clearly needs to rein in runaway health-care costs. But it has to be done in the right way -- not just by clamping down on spending, but also by boosting medical innovation and productivity.
Now that the court has upheld the individual mandate requiring most citizens to obtain health insurance, U.S. policymakers would ideally turn to the challenge of medical cost containment. This is unlikely to happen, however, because Republicans have vowed to make the repeal of the Affordable Care Act a centerpiece of their 2012 campaign message. Republican presidential candidate Mitt Romney dutifully promised Thursday to kill the "bad law," even though it's conceptually identical to the Massachusetts health plan he backed while governor of the state.
Conservative ideologues want to make the mandate and the substantial costs of expanding coverage to 33 million Americans a parable about the dangers of an overreaching and intrusive federal government. The administration ought to counter with a positive narrative about how bending down the health cost curve can help reverse America's competitive slide and spark an economic comeback.
Not only does the United States have the world's most expensive health-care system, but medical inflation routinely outpaces economic growth. Because most workers get their health-insurance coverage from their employers, this saddles firms with rising labor costs even as the United States seeks to slow and reverse the hemorrhaging of manufacturing jobs overseas. Fear of losing coverage inhibits worker mobility and makes the labor market less flexible. Meanwhile, employment in the health-care sector keeps growing without producing commensurate improvements in health outcomes -- a classic definition of low productivity.
Federal and state government budgets, meanwhile, are groaning under the growing burden of paying for health care. Many states have seen Medicaid spending for the poor displace education as their top spending item. And no one doubts that the mushrooming growth of federal health spending is the country's top fiscal challenge.
The numbers are astonishing: Federal health spending in 2012 will consume 4.9 percent of GDP, or about a fifth of the federal budget ($750 billion). The Congressional Budget Office (CBO) estimates conservatively that spending, driven by a combination of medical inflation and the baby boomers' retirement, will grow to 6.7 percent of GDP ($1.6 trillion) by 2022 and will hit 11 percent by 2050. Reducing that rate of growth is the key to stabilizing the national debt.
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