In total 45 million Americans are uninsured and the Institute of Medicine estimates that 18,000 of them die prematurely each year as a result.1
But the problems are much broader than just the uninsured. The typical insured family pays, directly and indirectly, more than one-sixth of its income for health care. And this expensive care is far less effective than it should be: Americans get too little preventive care when well, and only 55 percent of proveneffective therapies are administered when they are sick. At the same time, one-third or more of many major medical procedures are either inappropriate or of debatable value.2
Moreover, the problems of uninsurance and expensive or ineffective care are interrelated. More medically effective care could also be more affordable, reducing the number of uninsured. Conversely, it is impossible to address fully the problems of affordability and effectiveness without covering everyone. Much of the health care the uninsured do get is costly and inefficient with the costs passed on to others. Insuring everyone would not just eliminate these uncompensated cost shifts, it would also enable the health system to function better by expanding risk pooling and reducing the fragmentation of financing. Responding to these interrelated health challenges is also critical for economic performance more broadly for four reasons:
- Rapidly rising premiums put a strain on businesses, wages and jobs. When premiums jumped 52 percent from 2000 to 2005,3 the rising cost of compensating workers led businesses to cut jobs, particularly in sectors like manufacturing that tend to offer workers good health coverage.4 Over a longer period, workers generally bear the cost of higher premiums in the form of lower wages. Finally, rising premiums have led employers to drop coverage: the percentage of nonelderly Americans with employer-sponsored insurance has fallen from 70 percent in 1987 to 62 percent in 2005.5
- Ineffective care results in a less productive workforce that misses more days of work and performs less effectively on the job. The benefits of better health care create a positive externality for other workers and other firms that is not captured by the individuals or employers paying for the health care, creating an important role for government in public health and other areas.
- The rapid increase in public health spending is a central cause of the serious fiscal challenges we face in the years and decades ahead, a challenge that represents a deep threat to our economic well-being if not addressed. Solving the long-run financing challenges facing Medicare and Medicaid requires addressing the similar growth in health spending taking place in the private sector.
- Health care security is an important piece of the broader question of economic security. America’s patchwork, incomplete system of health insurance impedes the flexibility the economy needs to thrive and grow. Many workers are effectively locked into their jobs because they fear losing health insurance. According to one study, improvements in labor mobility would benefit both workers and firms by 25 percent.6 Moreover, the market-based economics and trade liberalization which are key to strong growth are more politically sustainable when workers have a greater sense of security and feel that they have more to gain and less to lose from the global economy.
1. Institute of Medicine (IOM ). 2003. Hidden Costs, Value Lost: Uninsurance in America. IOM Committee on the Consequences of Uninsurance. Washington, DC: IOM .
2. McGlynn, Elizabeth A., Steven M. Asch, John Adams, Joan Keesey, Jennifer Hicks, Alison DeCristofaro, and Eve A. Kerr. 2003. The quality of health care delivered to adults in the United States. New England Journal of Medicine 348 (26) : 2635-2645 and McGlynn, Elizabeth A. 1998. Assessing the appropriateness of care: How much is too much?. RAND Research Brief, RB-4522. RAN D, Santa Monica, CA .
3. In inflation-adjusted terms.
4. Kaiser Family Foundation and Health Research and Educational Trust. 2006. Employer Health Benefits 2006: Annual Survey. Washington DC: Kaiser Family Foundation. Reber, Sarah and Laura Tyson. 2004. Rising Health Insurance Costs Slow Job Growth and Reduce Wages and Job Quality. Working paper.
5. U.S. Census Bureau. 2006. Income, poverty, and health insurance coverage in the United States: 2005. Current Population Reports (August).
6. Madrian, Brigitte C. 1994. Employment-based health insurance and job mobility: is there evidence of job-lock? Quarterly Journal of Economics 109 (1): 27-51.