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Universal healthcare in US could improve economy

The boost to small business creation and self-employment would be particularly useful, as the US is (behind) in both relative to advanced economy peers.

Universal health care in the US could be a boon for capitalism, a programme of action that would ease the financial burden on businesses and open up the job market to more qualified employees across sectors. No longer hemmed in by the need for employer-subsidised health insurance, Americans would have more freedom to choose jobs and careers that interest them, and those with entrepreneurial ambitions would be more likely to achieve success without the crushing costs of healthcare offerings or the inability to attract top talent without them.

That’s what proponents say despite critics’ contention that universal healthcare would be too expensive and damaging to healthcare workers and institutions. There is some evidence for those hopes. In addition to providing medical care for the 28 million Americans without health insurance, a universal system could have real economic benefits.

Countries such as Sweden connect their current entrepreneurial booms to social safety nets that include universal healthcare. The Scandinavian nation has the third-highest start-up rate in the world and the highest three-year start-up survival rate. Said Reuters in 2021: "Often viewed as counter to entrepreneurial spirit, it's an outcome that might not have been envisaged by the architects of Sweden's welfare state in the 1950s."

This example is far from perfect equivalency. The US government is saddled with layers of bureaucracy and politicking, a population that dwarfs Sweden’s, and widespread worship of private enterprise. A switch to a single-payer system — sometimes dubbed “Medicare for All” — would be a tough transition. Such a massive program could lead to longer waits for appointments and procedures. Perhaps more significantly, hospitals and doctors almost certainly would see a drop in income. Private insurers currently shell out double or triple the dollar amount paid by Medicare or Medicaid for the same medical procedures and provider visits.

Critics say the reduced payments could distress hospitals and healthcare systems to the breaking point, causing them to cut services, consolidate with other companies, or close their doors. Employees of private insurance companies, as well as claims department workers in hospitals, could be out of jobs or moved to new ones outside their area of expertise.

Josh Bivens, the Economic Policy Institute’s director of research, said in a recent report that while any universal healthcare legislation would need to offer some solutions for the aforementioned issues – particularly establishing adequate payments to hospitals and providers – a single-payer system would strengthen the economy and open up a currently-restrictive job market:

Fundamental health reform like “Medicare for All” would be a hugely ambitious policy undertaking with profound effects on the economy and the economic security of households in America. But despite oft-repeated claims of large-scale job losses, a national program that would guarantee health insurance for every American would not profoundly affect the total number of jobs in the US economy. In fact, such reform could boost wages and jobs and lead to more efficient labour markets that better match jobs and workers.

The US is the only industrialised nation without a government-funded universal healthcare programme. Among 11 wealthy nations studied, the US has the worst-performing healthcare system by almost every measure, a 2021 report by The Commonwealth Fund found. With healthcare spending at 17% of Gross Domestic Product, or GDP, the US spends twice as much per person as countries such as the United Kingdom, Australia, and New Zealand. The rate of US healthcare spending adds up to about $10,000 per capita, much of that due to the fact that 75 million Americans, both uninsured and underinsured, can't pay their medical bills.

Researchers at the Yale School of Public Medicine measured the US healthcare system’s shortcomings in a way that hit much closer to home. Researchers argued that a universal healthcare programme would have saved hundreds of thousands of American lives during the ongoing Covid-19 pandemic. In a series of academic studies, the researchers laid out the high human cost and the astronomical price tag incurred by the pandemic thus far. Despite having the wealthiest economy in the world, the US had the highest national death toll and the 18th-highest death rate among all 193 countries on Earth.

In a paper published in The Lancet in May of 2020, researchers argued that the pandemic was already “exposing the systemic frailties in our healthcare system,” noting that more than 78 million people in America were either uninsured or underinsured. Of course, millions of people from this population got sick and were hospitalised anyway. Those billions in unpaid bills will eventually be passed down to taxpayers. A March 2022 follow-up study posited that a single-payer system could have prevented nearly two-thirds of the nation’s Covid deaths in 2020, which would have changed the trajectory of the US pandemic death rate. The results of this analysis were published in the Proceedings of the National Academy of Sciences:

Universal healthcare could have alleviated the mortality caused by a confluence of negative COVID-related factors. Incorporating the demography of the uninsured with age-specific COVID-19 and non-pandemic mortality, we estimated that a single-payer universal healthcare system would have saved 212,000 lives in 2020 alone. We also calculated that $105.6 billion of medical expenses associated with COVID-19 hospitalisation could have been averted by a Medicare for All system.

There are major US healthcare players, however, who say that the nation’s hospitals and healthcare delivery systems would be unable to maintain availability to the cutting-edge procedures and high-tech diagnostics currently available. The American Hospital Association argues that expanding government-subsidised healthcare would eliminate the lion’s share of healthcare providers’ income. A 2020 Kaiser Family Foundation research literature review found that private insurers often paid close to double what Medicare shelled out. Private companies paid 259% of the Medicare rates for physician services and 189% of the rates for inpatient hospitalisation. The AHA had this to say in a February 2022 statement to the US Congress:

While the AHA shares the objective of achieving health coverage for all Americans, we do not agree that a government-run, single-payer system is right for this country. Such an approach could upend a system that is working for the vast majority of Americans and throw into chaos one of the largest sectors of the US economy. (A 2019) study found that a proposal to create a government-run, public option Medicare-like health plan on the individual exchange could create the largest ever cut to hospitals – nearly $800 billion.

Even if the proposed single-payer program increased reimbursement rates above Medicare’s rates, our members’ experience suggests that the government does not always act as a reliable business partner. Delays in payment and retroactive changes to reimbursement policies leave providers at risk of inadequate payment.

A universal healthcare model would not completely replace the private healthcare industry, nor would it stop businesses from offering such plans to employees as part of their compensation packages. The divergent cost scenarios presented by players on opposite sides of the issue are open to educated predictions but remain unknown for the moment.

Bivens of the Economic Policy Institute insists that something has to change to open up the American employment market to fuller potential. Currently, he said, millions of Americans are stuck in “job lock”, abandoning their true career ambitions and educational training to take jobs that offer adequate health care coverage for themselves and their families. Adding to this tangle of problems: private insurance does not guarantee coverage above certain money caps, often $1 million per person, which means a serious accident or illness can send employees and families into financial ruin. People are forced to borrow against mortgages, seek out loans or or even declare bankruptcy.

Bivens wrote:

Medicare for All could decrease inefficient “job lock” and boost small business creation and voluntary self-employment. Making health insurance universal and delinked from employment widens the range of economic options for workers and leads to better matches between workers’ skills and interests and their jobs. The boost to small business creation and self-employment would be particularly useful, as the United States is a laggard in both relative to advanced economy peers.

One prevalent argument in favour of universal health care is that it matches with the US's creation and funding of institutions for the public good, including schools, police, roads, wastewater treatment, and open spaces. The Economist wrote that many Americans had a hard time stretching their minds around healthcare as a public good, as a basic human right in a wealthy country rather than a you-can’t-afford-it-too-bad capitalist privilege:

We're talking about whether or not to ensure that all citizens, rich and poor, get decent health care when they need it. Can the free market ensure this? No, no more than the free market can ensure that every child gets an education. Only the government can ensure that everyone is guaranteed decent health care. That is the public good we're talking about here: universal health insurance.

Image by Maksym Yemelyanov

Tamara Kerrill Field is Kaiju's Managing Editor. Her writing and commentary on the intersection of race, politics and socioeconomics has been featured in USNews & World Report, the Chicago Tribune, NPR, PBS NewsHour, and other outlets. She lives in Portland, ME.

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