The Gramblinite

Issue date: 6/11/09 Section: Voices

Christina Romer

Health care reform is more than a social imperative - it is an economic necessity. A new study by the President's Council of Economic Advisers demonstrates that the current American health care system is on an unsustainable path.

Without health care reform, American workers and families will continue to experience eroding health care benefits and stagnating wages caused by the pressure of escalating health insurance premiums. And without reform, rising spending on Medicare and Medicaid will lead to massive and unsustainable federal budget deficits.

Years of diagnosis on the ills of the U.S. health system have produced no cure. Health care expenditures in this country are currently 18 percent of gross domestic product (GDP) and, without change, will keep rising, until they account for nearly one-third of our total output by 2040. Even with this exorbitant bill, about 46 million Americans lack health insurance coverage today, and this number is predicted to rise to 72 million over the next three decades.

The president has articulated his goal of health care reform that slows the growth rate of health care costs, preserves choice of doctors and plans, and assures quality, affordable health care for all Americans. Over the long term, heeding President Obama's call for change will lead to faster economic growth, higher take-home pay for workers, greater employment opportunities, a more level playing field between small and large businesses, and deficit control.

The administration and health industry leaders have pledged to work toward a goal of reducing health care cost growth by 1.5 percentage points per year. And, the Administration is committed to working toward ensuring that all Americans have access to health insurance coverage. If we can achieve and sustain this ambitious rate of cost containment and expand coverage, the results would be significant. For example:

- Impact on income: For a typical family of four, income would be higher than it otherwise would have been by approximately $2,600 in 2020 (in 2009 dollars) and by nearly $10,000 in 2030.

- Impact on GDP: Real GDP would be 2 percent higher in 2020 than it otherwise would have been, nearly 8 percent higher in 2030, and nearly 16 percent higher in 2040. The key source of this improved growth would be increased efficiency in the health sector and increased investment stimulated by a reduction in the government budget deficit.

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