Healthy Economy | How healthcare, the economy and the new law intersect
There were many ideas about healthcare reform and how it should happen. There are many different ways to administer a nation’s healthcare system. The previous American system was one of the worst in the world. Out of the 192 member nations in the United Nations, healthcare spending in the U.S. per capita, or per person, was second highest behind East Timor, a nation founded in 1999 that ranks very low on the human development index.
Many critics of healthcare reform were particularly worried about costs. This is a very difficult thing to evaluate because it is impossible to know for certain all of the ramifications the bill will have across the health care industry as well as the greater American economy. This is because healthcare is one-sixth of the American economy or, more simply, one of every six dollars earned in the U.S. is spent on healthcare costs. In 2009 17.3% of the U.S.’s gross domestic product was spent on healthcare, up from 16.2% one year prior, or 12.1% in 1990. Regardless of the costs of the bill, the current system was clearly unsustainable, with estimates suggesting healthcare costs would continue to rise, reaching as much as 20% of GDP in the next seven years.
This means that healthcare has not only become more expensive for individuals, but also for businesses. The cost to both small and large businesses for providing insurance to employees has been increasing so rapidly that it has eroded profit margins. Since 17% of the national product is being spent on healthcare, compared to around 10% in most European nations for instance, this means that domestic businesses spend significantly more of their revenue on healthcare for employees rather than on expansion, innovation and other areas of business development, thus putting them at a disadvantage against foreign competitors and reducing profit, or the amount of revenue after expenses are deducted. Businesses will likely enjoy savings because of the healthcare bill, and thus make greater profits, stimulating the economy and paying more taxes.
On the flipside, the federal government has made certain commitments: first to establish new entities like exchanges and insurance pools, and second to individuals and small businesses to help make healthcare affordable for them (these mainly consist of subsidies, rebates and tax refunds). Both of these measures will cost the federal government a large amount of money, so the question becomes will the savings, in this example represented by the businesses, balance out the costs of the program. However these are only a few simple examples that do not begin to cover all the myriad ramifications of the law. There are also new fees that will be levied against health insurers and medical device manufacturers which will help fund the statute. Because healthcare is an industry itself, consisting of insurance companies, hospitals, medical suppliers and treatment centers, as well as an intrinsic part of all other industries—because many businesses provide health insurance to employees—it is very difficult to measure all the effects that changing our health care system will have on the economy. Despite possible unforeseen effects and imperfect models, best estimates say that the healthcare bill will reduce the federal deficit by $138 billion in the first decade, and $1.2 trillion dollars over the next 20 years.
Many critics of healthcare reform were particularly worried about costs. This is a very difficult thing to evaluate because it is impossible to know for certain all of the ramifications the bill will have across the health care industry as well as the greater American economy. This is because healthcare is one-sixth of the American economy or, more simply, one of every six dollars earned in the U.S. is spent on healthcare costs. In 2009 17.3% of the U.S.’s gross domestic product was spent on healthcare, up from 16.2% one year prior, or 12.1% in 1990. Regardless of the costs of the bill, the current system was clearly unsustainable, with estimates suggesting healthcare costs would continue to rise, reaching as much as 20% of GDP in the next seven years.
This means that healthcare has not only become more expensive for individuals, but also for businesses. The cost to both small and large businesses for providing insurance to employees has been increasing so rapidly that it has eroded profit margins. Since 17% of the national product is being spent on healthcare, compared to around 10% in most European nations for instance, this means that domestic businesses spend significantly more of their revenue on healthcare for employees rather than on expansion, innovation and other areas of business development, thus putting them at a disadvantage against foreign competitors and reducing profit, or the amount of revenue after expenses are deducted. Businesses will likely enjoy savings because of the healthcare bill, and thus make greater profits, stimulating the economy and paying more taxes.
On the flipside, the federal government has made certain commitments: first to establish new entities like exchanges and insurance pools, and second to individuals and small businesses to help make healthcare affordable for them (these mainly consist of subsidies, rebates and tax refunds). Both of these measures will cost the federal government a large amount of money, so the question becomes will the savings, in this example represented by the businesses, balance out the costs of the program. However these are only a few simple examples that do not begin to cover all the myriad ramifications of the law. There are also new fees that will be levied against health insurers and medical device manufacturers which will help fund the statute. Because healthcare is an industry itself, consisting of insurance companies, hospitals, medical suppliers and treatment centers, as well as an intrinsic part of all other industries—because many businesses provide health insurance to employees—it is very difficult to measure all the effects that changing our health care system will have on the economy. Despite possible unforeseen effects and imperfect models, best estimates say that the healthcare bill will reduce the federal deficit by $138 billion in the first decade, and $1.2 trillion dollars over the next 20 years.
