U.S. competitive without medical monopoly

The November election made a bull’s-eye out of Obamacare, which some Republicans want to repeal. Obamacare is a worthy target because it is a significant lurch toward so-called “universal” health care.

The lack of such a government monopoly system, some charge, harms American competitiveness. But that argument fails to hold up.

American automakers used to claim that they spent up to $1,600 per car on health care, more than they spent on steel, and a multiple of what foreign competitors spent. Case closed? Not at all. The carmakers failed for their own reasons. We don’t hear entrepreneurs such as Facebook’s Mark Zuckerberg claim that U.S. health care renders them uncompetitive against foreign competitors.

That’s because U.S. gross domestic product (GDP)per capita is higher than that of other nations, largely because of American productivity. U.S. GDP per person employed in 2008 was $65,480. Even other developed countries just produce between 60 percent and 90 percent of the value that the United States does per hour worked. One hour of work in Germany produces just 72 percent of the output of an hour of work in America. It’s perfectly natural that the richest country spends more on health care than less productive ones.

In the United States, we earn significantly more income than workers in other countries, even after paying for health care – a “bonus” of American productivity. U.S. GDP per capita is still more than $6,000 more than in Germany – after subtracting health spending in both countries. It’s more than $8,000 more than in France, $5,000 more than in Great Britain, and $4,500 more than in Canada.

Proponents of Obamacare, who seek to expand state power over our health choices, fail to recognize that a higher burden of government reduces national productivity but does not actually reduce health costs. Consider the oft-cited fact that Canadian and U.S. health spending as a share of GDP was about the same before the Canadian government took over health care, but diverged starting in 1970, soon after the Canadian government completed its takeover. This does not mean that the state can control costs better than the private sector.

For macroeconomic and policy reasons apart from the government takeover of health care, real GDP growth in Canada dramatically outpaced U.S. growth between 1969 and 1987. Between 1975 and 1987, soon after the Canadian state imposed its monopoly, the growth of real-dollar spending on physicians’ services in Canada stabilized at just below the U.S. rate: 4.2 percent versus 4.8 percent annually.

Although many Americans suffer without the means to pay for their health care, this is largely a consequence of misguided government intrusion. And the American welfare state heavily subsidizes many residents’ health care. Medicaid, the joint state-federal program for poor patients, has grown relentlessly in the past four decades.

Meanwhile, the percentage of all firms offering health benefits actually increased from 66 percent in 1999 to 69 percent in 2010. Recently, a greater number of smaller firms have begun to offer health benefits. So the “crisis” Obamacare is supposed to fix is not what it seems.

The status quo remains unacceptable in many ways: lack of portability of health benefits, opaque prices for health services, reckless trial lawyers driving up costs through expensive litigation, and regulation that reduces competition among payers and providers. But these are consequences of state and federal legislation.

The solution to government failure is not more government, which Obamacare imposes. Congress should repeal this scheme and implement reforms that reduce government power. That will make for better health care and preserve – or increase – American productivity and competitiveness.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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