A Closer Look at Healthcare and the Economy

We all know that healthcare makes up a large component of our nation’s GDP, or Gross Domestic Product, but exactly how much is it and what changes have we seen from last year’s report? Well, GDP is obviously a closely watched measurement of our overall economy, and jumping into the calculations gets pretty intricate so we will stick somewhat to the basics of the Healthcare numbers.

Healthcare costs have moved swiftly into the limelight of the recent Presidential election, and more specifically now into the hands of President-elect Barack Obama. Rising healthcare costs, the countless uninsured, and comparisons to other countries’ low-cost healthcare coverage will remain in the spotlight for years to come. It will be extremely difficult to have a complete overhaul of our healthcare system, but I imagine different legislation will pass through and hopefully give some relief to a very large problem within the United States economy. Why don’t we have a look at the most recent numbers to come out?

Healthcare and GDP

Unfortunately it may seem like I am presenting old numbers; however, the lag for economic data is fairly long so the problem at hand may be getting significantly worse. We may not fully realize the negative effect for quite some time. The nation’s healthcare spending in 2007 expanded more rapidly than the overall economy again, accounting for 16.2% of GDP, an increase from the 2006 number of 16%.

The total price tag grew 6.1% to $2.2 trillion, or $7,421 per person. This number is slightly down from the 6.7% growth the United States experienced in 2006 according to a recent study. In addition, national healthcare spending in 2007 increased at its slowest rate since 1998. One important fact to note is that prescription-drug spending slowed to its lowest rate in 45 years. It climbed only 4.9% compared to an 8.6% increase a year earlier. The many articles I have written about the struggles pharmaceutical companies have faced led to this slowdown.

The inability to expand its pipeline and make-up for its patent losses on blockbuster drugs has revitalized the generic sector and will lead to higher revenues from this sector in years to come as they offer effective lower-cost drugs.

Another key concern leading to the slowdown of prescription drug spending has been the ever-so merciless Food and Drug Administration (FDA), which has consequently increased the number of “black box” safety warnings on drugs. In my opinion, the FDA needs to be restructured as they are struggling to keep up with the increase in drug applications flooding their system. This especially holds true with the talks of biogenerics, or generic forms of biotech drugs. In the United States this will help Americans who struggle to pay for their healthcare costs, but will only lead to further exhaustion of the already understaffed FDA.

Healthcare and Obama?

It’s easy to say that President-elect Obama has way too much on his plate coming into office, and only time will tell what exactly his focus is towards and where funding ends up. With the ongoing recession and war remaining in focus for months, if not years to come, will our nation’s healthcare problem ever be solved? Personally, I do not think we can fix the entire healthcare system like the TARP plan was put in place to fix our financial crisis. But is that plan really working? Well let’s push that deep question to a never-ending novel to come later.

An early victory may have come for President-elect Obama regarding children’s healthcare. A vote may come soon on renewing a health insurance program for children which expires on March 31st. The State Children’s Health Insurance Program, SCHIP, provides health insurance for children in families that do not qualify for Medicaid because they earn too much but not enough to afford private insurance coverage. Numbers show that 6 million children are currently enrolled and depending on the funding for the bill, enrollment may increase to about 10 million. It is difficult to say what exactly President-elect Obama has planned next, but we do know it will be a long process to fix the issues that surround Medicare, Medicaid, and the rising uninsured.

For one, I do feel the issue concerning the FDA should be fixed immediately and not pushed to the back-burner. Expect legislation to push for more generic usage, funding to small businesses for health insurance coverage (small businesses simply cannot keep up with the rising healthcare costs), and an attempt to mandate all employers to provide coverage. The latter will be the most troubling and will have a very long, drawn-out process that will no doubt be interesting to watch unfold.

-Ryan Savitz

Disclosure: None.

Comments

[dw57:]

the FDA is a big problem alright. but its biggest problem is that its not doing its job. its job is to protect the public, not be a cheerleader for the drug companies and medical equipment makers. its other job is to make sure we have safe food. another job it can't do. so its name is a misnomer. if it can't detect problems with drugs or equipment, then it has no business approving them for use. if it can't detect problems with the imported (or domestics ) food supply it has no business allowing any food from sources it can't vouch for as being safe. and how can its approval be used as a defense in court when it can't seemingly do the job?

Jan 14 02:55 PM

[Jason Rines...:]

FDA set up several office locations in China. These last two years. The sucking sound of clinical trial business here to there was dramatic. So I am quantifying your point but note that the FDA being the cheerleader is based on the overegulation Rx companies face. Always a pendulum when it comes to regulation. Prior late 1990's not enough regulation and little supervision, now too much in this sector. I assume that is exactly what we will see occur in the financial sector.

While the public at large gobbles up the idea of universal healthcare, I see it as government's solution to underfunded Medicare and retiring Boomers. So lets do some math. My family coverage is $14,000 per year for the best health insurance money can buy. The government offers universal health care and justifies and increase in taxes of 10% more per year. I would readily say I prefer paying my own health insurance, thank you very much. As for what may happen in the interim of legislation forcing my business to provide specific health insurance, the difference of what I already offer and what is mandated will be deducted from salaries I offer employees.

How about we start with enforcement of the law, investigate and prosecute on the $30 B worth of fraud between Medicaid and Medicare? The U.S. must also decide on the illegal alien benefits in regards to healthcare which should be zero. No legal status, no emergency room coverage either. There's another $18 B of cost savings. Last, while I am not much of an Obama fan, I do agree with allowing Rx competition from Canada.


On Jan 14 02:55 PM dw57 wrote:

> the FDA is a big problem alright. but its biggest problem is that
> its not doing its job. its job is to protect the public, not be a
> cheerleader for the drug companies and medical equipment makers.
> its other job is to make sure we have safe food. another job it can't
> do. so its name is a misnomer. if it can't detect problems with drugs
> or equipment, then it has no business approving them for use. if
> it can't detect problems with the imported (or domestics ) food supply
> it has no business allowing any food from sources it can't vouch
> for as being safe. and how can its approval be used as a defense
> in court when it can't seemingly do the job?

Jan 14 03:25 PM

[Jim Myrtle:]

"Last, while I am not much of an Obama fan, I do agree with allowing Rx competition from Canada"

Competition with government mandated pricing in Canada?
Doesn't sound like competition to me.

On Jan 14 03:25 PM iThinkBig wrote:

Jan 15 09:55 AM

[Joyful Alte...:]

Medicare Part D must be fixed ASAP. It costs the government (AKA, us) a fortune to subsidize pharmaceutical companies and health insurers. I haven't heard any buzz on this, and I wish I did.

Another big waste of Medicare money is subsidies given to health insurers to provide HMO-type plans that don't provide better care or save any money. That program will be canceled ASAP, according to the buzz, and good riddance.

There's a lot of fraud and semifraud in Medicare durable equipment. That whole system has to be tightened up.

In the end, we'll have to go to single-payer universal health insurance, from both a corporate standpoint (could save GM's bacon immediately) and a human standpoint (in a lot of states, a lot of averagely healthy people can't buy health insurance because of "preexisting conditions"). "Medicare for all" could be that vehicle if the preceding problems are fixed.

(And let's avoid paying for health care scams like magical back dekinking techniques and amazing ginkgo berry pills!)

Jan 15 12:21 PM

[Jim Myrtle:]

"In the end, we'll have to go to single-payer universal health insurance, from both a corporate standpoint (could save GM's bacon immediately) "

GM employees don't want to lose their gold plated coverage.

"and a human standpoint (in a lot of states, a lot of averagely healthy
people can't buy health insurance because of "preexisting conditions")"

A lot of people die waiting for government healthcare, in those countries that have single-payer.


""Medicare for all" could be that vehicle if the preceding problems are fixed"

What's the long-term shortfall in Medicare funding? You think it might get worse if we cover everybody? Or should we just raise taxes? How high?

On Jan 15 12:21 PM Joyful Alternative wrote:

Jan 15 12:34 PM