RALEIGH – Health care is among the issues of greatest concern to voters in North Carolina and across the United States. It is a critical and rapidly growing segment of the American economy. It represents perhaps the most daunting fiscal challenge facing our governments in the long run – be it the trillions of dollars of unfunded liability in the federal Medicare program, made worse by the Bush administration’s disastrous prescription-drug benefit, or the hundreds of millions of dollars in additional state Medicaid expenditures that North Carolina taxpayers will likely have to finance in just the next few years, if nothing is done either to tighten eligibility, reform the benefits package, combat fraud, or give low-income recipients incentives to consume medical services wisely.
In other words, if you don’t like reading or hearing discussions of health care policy, get over it. Our politics will only get more health-carey in the future.
I’m not a doctor, and I don’t play on TV. But my teenage nickname was “Doc,” one of my online-superhero alter egos is name after another famous “Doc,” and I have just successfully bandaged my son’s foot. So I’m taking the liberty today of prescribing a course of treatment for those suffering from Health Issues Confusion Courting Unwise Policy Syndrome (HICCUPS).
Your initial dose of cleansing reality will be from Business Week – this week’s cover story, in fact. Economics writer Michael Mandel has taken a look at job-creation data and discovered that the 1.7 million new private-sector jobs added since 2001 can be accounted for entirely within medical services, pharmaceuticals and medical devices, health insurance, and related fields. That doesn’t mean that the rest of the American economy is moribund, of course. Companies don’t exist to create jobs. They exist to sell goods and services to customers, thus making a return on their owners’ investment. What’s happening is that productivity is soaring in many industries, allowing them to make and sell their wares at a lower cost per unit moved. Part of the savings is in labor. Furthermore, as is widely known, some industries are increasingly employing people outside the United States, providing consumers with tremendous benefits in price (and sometimes even in quality).
In health care, productivity gains have been harder to realize – in part because of the nature of personal services and in part because of a failure to employ technology effectively – and many of the jobs can’t be exported (unless the patient would be going along). So it has been adding jobs, all kinds of jobs. Mandel paid particularly attention to North Carolina:
Since 2001 [North Carolina] has seen a total job increase of 24,000, or 0.6%. Meager enough – but take out the 60,000 jobs added by health care, and the state’s jobs would have decreased by 36,000. Employment in manufacturing, retailing, trucking, utilities, and information all fell. And construction added only 5,000 jobs, a mere fraction of health care’s contribution.
Mandel’s take on all this is a bit darker than I think is warranted. Health care should be growing in relative importance in America’s economy, as should other service industries. That’s what basic economic theory tells us. As incomes rise, people are unlikely to spend a fixed percentage on goods such as food or cars – particularly as goods become less expensive through the very practices discussed above (productivity gains and imports). Those spending shares will shrink. That means spending on other goods and services must grow, as we spend our savings on things that improve our quality of life. Health care is near the top of that list, which also includes education, personal services, and recreation.
That doesn’t mean, however, that Mandel’s findings don’t point the way to important and troubling issues in health care reform. Much of what American consumers are purchasing from their health providers is what economist Arnold Kling calls “premium medicine” – expensive procedures that bring marginal benefits, if any, to patients. Also, many analysts and voters are concerned about disparities in health care access and outcomes, be they within the United States or between our country and the rest of the developed world.
Be patient. You are just beginning your treatment. The next round of mental meds will come later this week.
Hood is president of the John Locke Foundation.