The Wall Street Journal, November 13, 2007; Page A25
Medical News Today, November 14, 2007
Rx Journals.com, November 14, 2007*

'As major employers, we are engaging in one of the most crucial domestic policy debates of our time -- fixing our nation's health-care crisis, reducing out of control costs, and ensuring every American has affordable health care," said CEO Steve Burd of Safeway, a supermarket chain, earlier this year.

He's not alone. Several American business leaders have come to believe that the American health-care system is not only bad for our health but also for national competitiveness. In the automotive industry, General Motors claims that it spends about $1,600 per car on health care. In Japan, according to GM, Toyota's per automobile healthcare expenditure is just $110.

Some politicians and executives have concluded that the "solution" to this problem is universal, government-run health care. They must be onto something, right?

Health coverage is indeed becoming more expensive for businesses. Over the past eight years, the percentage of firms offering health benefits to employees has dropped significantly, to 60% from 69%.

This decline, however, is almost completely accounted for by businesses with fewer than 10 employees.

These firms find health benefits unaffordable because states have laid a massive burden of over-regulation on small-group health insurance since the early 1990s, making it increasingly expensive. In the face of this, the freedom to contract employment without health benefits provides a valuable option for American entrepreneurs and workers. Only in the U.S. can they opt out of the government-regulated health "system," if it allows them to be more competitive.

But what about the share of Gross Domestic Product (GDP) spent on health care, a metric of health system performance and value that some consider definitive? The United States leads the pack in this regard, spending far more on health than other countries. Surely this puts the U.S. at a competitive disadvantage, doesn't it?

No: It's the other way around. America's high productivity gives us the ability to spend more on health care, especially the latest treatments and technologies, than other developed nations that labor under forms of socialized health care.

Robert L. Ohsfeldt and John R. Schneider of the American Enterprise Institute have determined that health spending increases at a constant rate of about 8% for every $1,000 increase in GDP per capita. For example, if GDP rises from $30,000 per capita to $31,000, health spending increases by $232. But if GDP per capita rises from $40,000 to $41,000, health spending increases by $500.

Thus, because Americans earn so much more than people in other countries, it naturally follows that we spend more on health care.

Consider four countries whose health-care systems are often held up as admirable alternatives: Canada, Germany, France and Great Britain. Certainly, the U.S. spends significantly more on health care than those countries do, but these nations also earn significantly less income per person.

Look at it this way: Even after paying for our health care, Americans have far more money left over than their neighbors to spend on other goods and services. It works out to about $8,000 more than the average German or Frenchman, and about $4,000 more than the average Canadian or Briton.

Of course, averages obscure many harsh realities and hide the fact that many Americans are unable to afford health care.

To improve the state of American health care and lighten the burden on business and workers, policy leaders should push for portability of health benefits, transparent pricing for health services, tort reform and more competition among both insurers and providers.

Crusaders for "universal" health care allege that America's unique lack of government-mandated coverage is a handicap to the nation's competitiveness. Given America's superior economic performance, however, it is a uniqueness we should not rush to abandon.

Mr. Graham is the director of health care studies at the Pacific Research Institute.

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