Why Can’t Americans Save Money? Because It’s All Going To Health Insurance Companies.
Posted by Phoenix Woman on January 17, 2010
The Left Business Observer points out that Americans would have been able to save more money over the past few decades if they hadn’t had to hand over their wallets to Aetna, UnitedHealth and Blue Cross Blue Shield:
Everyone knows that American consumers have been on a binge for the last ten or twenty years. Data connoisseurs could even tell you that the consumption share of GDP rose from an average of 64% in the 1980s to 70% in 2007–8. But while the numbers are accurate, they’re not really telling the story of a binge. Much of the rise has come from spending on health care, not flat-screen TVs.
[…]
But there’s also another point here. While the consumption spike may look like the result of an accounting convention, it’s also reflecting a sad reality: an enormous, and ever-increasing share of our national income is going to health care. Of course, some unquantifiable share of that spending makes people healthier, happier, and more productive. But much of it doesn’t. In economic jargon, it’s a deadweight loss. As the graph above shows, the U.S. devotes a far larger share of its national income to health care than any other country: 37% more than the second-biggest spender, France; 49% more than Canada; 68% more than Sweden; 87% more than the UK. Yet U.S. health indicators are consistently among the worst in the OECD, with terrible ratings on life expectancy, infant mortality, obesity, and mental health. U.S. readings on all these are worse than countries spending far less on health care.
So the rise in the consumption share of GDP and the long slide in our savings rate is telling us something. American consumers aren’t the profligates of legend, but that our health care system certainly is.
Yup. And much of that expense comes from the different players passing the cost buck back and forth, as Krugman pointed out back in 2005.
2 Responses to “Why Can’t Americans Save Money? Because It’s All Going To Health Insurance Companies.”
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Charles II said
This is the point that almost no one in the health care “debate” (if “debate” is what one calls three parts bribery to two parts demagogy) seems to get. The system is about to crash. The Democrats and Republicans are mostly arguing about who gets to be at the controls when it does.
There are all kinds of danger signals. Doctors are refusing Medicare patients because reimbursement rates are too low. States would like to expand Medicaid rolls to get cost savings, but can’t because our tax system is a mess; the cost savings are realized mostly at the local level, so there’s no strong incentive for the state to act on its own, and if the state wants to stay within the Medicaid framework, they can’t act without Federal approval. Personal bankruptcies, which we were promised would be eliminated if only we made them painful enough, are rising as people lose jobs and medical coverage. The federal budget deficit is driven largely by medical costs.
Medicare’s 2009 budget was $498 B. Medicaid’s federal contribution was $253B. If we cut medical costs of those programs by just 20%, that’s $150B of savings. But that’s just part of the budgetary effect. There is something like $800B being spent on medical care above what is spent by the other developed nations. So, there’s roughly $650B in savings to be had from private insurance, money that would go in the pockets of individuals or the coffers of corporations. Incomes, both corporate and individual would get a big boost. If that were taxed at 20%, that’s another $130B in revenues, cutting the deficit by $280B total. Our deficits, excluding the bailout, run in the $500-$600B range. In other words, solve the medical insurance crisis, and half the structural deficit just goes away.
The rest of it has to be solved by a combination of taxes and cutting defense spending. But solving the medical cost crisis is the easy part.
ShortWoman» Blog Archive » A Rock, a Hard Place, and a Pyramid said
[…] So to review: more small businesses and less money being lent to them. That is a recipe for failure. These are not the sorts of businesses that can generally get venture capital, and these business owners certainly can’t get home equity loans right now. And frankly, all too few of us have anything in the way of savings. […]