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Should We Blame Health Care For U.S. Deficits?

April 9, 2012
Written by: , Filed in: Practice Management
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Whether the United States can eliminate its federal budget deficit depends on health care costs, according to the Center for Economic and Policy Research (CEPR).

The center, a Washington, DC-based economic-policy think tank, has an online “Health Care Budget Deficit Calculator” that shows what would happen to U.S. budget deficits if we spent as little on health care—as a percentage of the gross domestic product (GDP)—as other industrialized nations.

So if the United States (16.2 percent of GDP, 78.1 life expectancy) spent as much as Japan (8.3 percent GDP, 82.9 life expectancy), we would start running a budget surplus around 2039. according to the calculator.

If we keep doing what we’re doing, the calculator predicts, budget deficits will peak at 87 percent of GDP in the 2040s before drifting down into the 70s—if the Affordable Care Act (ACA) remains in effect. The calculator attributes that projection to the Congressional Budget Office. If the ACA’s cost-saving provisions are removed, the calculator predicts, budget deficits would top 100 percent of GDP by 2039 and keep climbing.

According to the center:

The CEPR Health Care Budget Deficit Calculator shows that if the U.S. can get health care costs under control, our budget deficits will not rise uncontrollably in the future. But if we fail to contain health care costs, then it will be almost impossible to prevent exploding future budget deficits.

The center tends to take “progressive” positions. Or “liberal,” if you prefer. We offer the label not as a code for unthinkingly rejection or acceptance of the center’s viewpoint but simply as an attempt to provide perspective.

Anyway, how do you solve the problem?

If U.S. defense spending (4.8 percent of GDP) dropped to the level of Japan’s (1.0 percent of GDP), that would help the budget outlook too. But Japan and the rest of the free world depend on (or, to put it more bluntly, freeload on) U.S military might all over the globe.

Similarly, as we’ve mentioned and others have pointed out, the robust U.S. profits made by medical-device and pharmaceutical companies help to fund research and innovation. If the U.S. government directly or indirectly reined in those profits, as other industrialized countries’ health-care systems do, fewer imaging innovations or new drugs would appear—worldwide.

So how should the United States control health-care costs? The center suggests a “global trade” in health care—allowing U.S. consumers to use their Medicare money to buy into other countries’ health-care systems, for example, and making it easier for foreign physicians to practice in the United States. After all, the center says, “Japanese competition led to lower car prices and better quality.”

Yeah, but Japanese carmakers achieved those successes because they were more innovative. The world’s innovations in health care are not coming from Japan. This think tank needs to do more thinking.

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