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Tags: medical | gdp | unions | single-payer

Medical Percentage of GDP Not Inherently Alarming, But . . .

Medical Percentage of GDP Not Inherently Alarming, But . . .

Paul F. deLespinasse By Tuesday, 12 October 2021 06:25 AM EDT Current | Bio | Archive

In 1960, healthcare accounted for 5% of the U.S. Gross Domestic Product (GDP). It has now risen to 18% and is continuing to increase.

This increase in medical expenditures isn't inherently alarming. The percentage of GDP devoted to various expenses has regularly increased or decreased, sometimes substantially, as the economy changes.

In 1900 average Americans spent about 43% of their income on food, but that has fallen to about 10%-12% today.

In 1900 nobody spent anything on airline tickets, radios, TV sets or computers, technologies which had not come along yet. Obviously those items now account for a significant percentage of GDP.

The cost of air travel in constant dollars has come down greatly since World War II, while the costs of housing, medical care and college education have risen dramatically.

It is not surprising that spending on medical care has increased. People are willing to spend a significant part of their income in pursuit of good health and longevity. And medical technology — antibiotics, imaging, surgical technique, vaccines — has advanced so greatly since 1900 that the money spent on medical treatment can often produce spectacular results.

The size of the increase should raise our eyebrows, though. It is impossible to determine the total amount of GDP that should be spent on medical care. But when we examine today's medical system we find troubling examples of gross inefficiency.

Today's medical system evolved one step at a time. Each step made sense when it was taken. But the end result is a system that no one in their right mind would design if they were starting from scratch.

Since medical systems, like all institutions, have inertia — a strong tendency to remain the same — the American medical system is very resistant to change despite the fact that it is not well suited to today's conditions.

The biggest problem with today's medical system is its multiplicity of insurance companies and government programs. Each has different coverage and red tape that doctors, hospitals, and other medical providers must cope with after treating an insured person.

It costs the average doctor an estimated $80,000 to $100,000 per year just for the staff required to handle this complicated billing.

A single insurance agency, public or private, that covered everyone in the country with a standard policy would eliminate a high percentage of this administrative cost. However, today's private insurance companies would lose out if such a "single-payer" system were adopted, and they employ an army of lobbyists to prevent Congress from enacting any such thing.

The lobbyists enjoy one huge advantage.

Many Americans receive medical insurance through their jobs and mistakenly believe that the so-called "employer's share" of the cost does not cost themselves anything. But employers are diverting money for the insurance from the pot from which employees are paid, so this substantial sum is really paid by the workers as reduced wages.

If we imitated other advanced countries and enacted a single-payer insurance system (such as Medicare For All) the tax increases it would require would be very visible.

But what workers are currently paying in the form of lower wages is largely invisible to them, even though it is stated on line 12 — code DD — of each worker's annual W-2 form.

Insurance company lobbyists opposing a single-payer system would capitalize on this widespread misunderstanding to convince people the single payer system would cost them more. And if people think single payer is a bad idea, Congress won't enact it.

If Congress enacts single-payer, it will need to require employers to add the amount they are currently paying for insurance to each worker's wages.

Reformers therefore need to educate everybody to understand how much they really are already paying, so people can make an educated comparison of the costs (higher taxes) and benefits (higher wages) of changing to a single payer system.

Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. Read Professor Paul F. deLespinasse's Reports — More Here.

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What workers are currently paying in the form of lower wages is largely invisible to them.
medical, gdp, unions, single-payer
Tuesday, 12 October 2021 06:25 AM
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