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Healthcare Reform IS The Economic Stimulus We Need

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healthcare reform. there is no time to waste

let's hope the ambulance is coming because there is no time to waste

In today’s NYT, Paul Krugman wonders why we haven’t heard more about major healthcare reform in the first few days of the new administration. His concern is that the economic crisis will only make the oncoming healthcare catastrophe that much more severe. It’s a very good point. Krugman surmises that perhaps solving the economic meltdown is dominating the agenda to the exclusion of almost everything else.

But Krugman doesn’t go far enough. What he fails to mention is that solving the healthcare crisis will, over the medium term, will dramatically help overcome America’s deep economic weaknesses.

It goes like this. Regardless of the plan adopted, and it’s most likely to be a build on Obama’s idea of offering a competitive government plan that will release the grip on our healthcare held by profiteering private insurance companies, the new system will have a very significant downward pressure on healthcare costs.

Right now the US spends around 15% of total GDP on healthcare, and have around 50 million uninsured. In the UK, with its single-payer system that figure is around 8%. Nobody is uninsured. It’s a cheaper, more efficient system.

The difference between the US and UK GDP spend is around 7% of GDP. America’s GDP last year was around $13 trilliion. 7% o that is $910 billion. That’s money released back into the economy – to be spent somewhere else.

So now let’s get conservative. Let’s say that over time we’re only able to reduce US healthcare costs to around 11% of GDP. That would still put around $450 billion a year and maybe more back into the economy.

Everyone would have more money in their pockets which would enable them to pay off debts, restoring confidence in lending, and freeing them to spend which would restore economic growth. There are multiplier effects too. US businesses, freed from their legacy costs will be far more competitive in the global marketplace. Oh, and the ranks of the uninsured would be reduced to zero.

It will take a few years to reach this happy place, but for an investment of say $100 billion a year to build this new system for five years (didn’t we just opt for $300 billion in useless short term tax cuts as part of the absurd stimulus package), we’ll break even in a few years. After that we’ll see a major economic boost far into the future, helping to shore up the US economy well into this century.

One more thing. That $450 billion a year freed up by healthcare reform is not borrowed, or printed, it’s not inflationary at all, and it’s not raised from the Bank of China, or some oil-soaked sovereign wealth fund. Instead it’s earned through efficiencies forged right her in America.

Major healthcare reform is an investment in our people, and our economy. It won’t be easy, but the President must not waver, and must not succumb to the myth of bipartisanship that would water down the legislation and dramatically lessen its impact.

Obama needs to act decisively. Our children and grandchildren demand it.

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One Response

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  1. Simon:

    Your Healthcare piece is excellent you should submit it to the OP Ed section of the LA Times!

    Keep up the great work…

    Regards,

    Mark

    marco

    February 19, 2009 at 10:28 pm


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