06/06/2013 07:18 pm ET Updated Aug 06, 2013

Healthy Choices

There has been a good deal of partisan argument in the nation's capital about the impact in 2014 of nearly full implementation of the Affordable Care Act (otherwise known as Obama Care). The law's detractors, especially Congressional Republicans, claim there will be chaos, spiraling expenditures, and no improvement in health care. Its defenders point out that millions of people will be able to get insurance for the first time and that, while there may be some inevitable confusion, these overheated fears are unjustified. In fact, most people will find that their existing insurance will not change at all. Moreover, there is persuasive evidence that the program is already shifting the curve of expenditure growth in the health field. For example, the Affordable Care Act's Medical Loss Ratio (MLR) provision saved consumers in the individual market an estimated $2.1 billion last year, the bulk in lower premium costs, according to an analysis by the Kaiser Foundation's Cynthia Cox, Gary Claxton, and Larry Levitt.

And it is well known by health experts that uninsured people actually cost us more money because they wind up in emergency rooms and on the minus side of hospital expenditures. The Affordable Care Act anticipates substantial savings from insuring such people. And, indeed even Congressman Paul Ryan, the Republican expert on these things, counted on $720 million in savings when he developed his own budget plan to close the gap between expenditures and tax receipts.

Universal health care, of course, is a settled issue in nearly every other advanced nation. But in the United States almost every facet of government involvement in the area remains a bitter political battle ground. The conflict might have some productive value if it were a fight about efficiency in the health care field or the merits of alternative universal health care plans. It's really not. In the abstract, at least, there is agreement among all but a few libertarian hold outs that everyone should have health insurance and access to a reasonably high level of care. But not far from that sort of generality consensus breaks down. Unfortunately the argument then is often about ideological matters and not really about substance at all.

Part of the problem could be that the two sides are not really talking about the same thing. The Democrats and handful of surviving moderate Republicans are focused on achieving nearly universal coverage; the conservatives inside and outside of Congress are really driven by the question of who pays for health care. Supporters of Obama Care believe that the costs will actually be greater if something is not done. Opponents see health care as "breaking the bank" because of the increasing share of national income that is spent in this sector.

But is spending more on health care necessarily a bad thing?

As we get older as a nation, more American consumers are likely to want to spend money not on roller skates or skateboards, but rather on walkers or canes. That shift, in itself, is not a good or bad thing. The difference, of course, between these expenditures is obvious; nobody prescribes roller skates as essential to your quality of life. And nobody provides you with public subsidies to buy them. Health care is different; about half the total national bill for it is already paid by government programs.

When expenditures are private no one questions how they affect the overall economy. Virtually all consumer and business activity is treated the same way. Changes in preferences are seen as inevitable. We accept without question the fact that consumer spending now includes over a billion dollars on individualized ringtones for our cell phones. But government activity is always subject to question.

So what is the downside if a greater share of GDP is composed of health care spending? Most of the jobs are here; the field is high tech; we actually export some health care related products, and the demand is growing. That scarcely sounds like a ticket to economic disaster.

Okay, a big shift is underway, with health care expenditures, although they have slowed down recently (there is no consensus about why), accounting for a larger share of total spending. But there have been larger shifts in the past. Think of when people switched from buggies and horses to automobiles. There was tremendous dislocation in the job market, huge public expenditures to build roads, private capital outlays to build filling stations and auto dealerships. Overall a huge portion of the National GDP switched from one category of consumer and government spending to another.

National accounting does not help us to "judge" whether some expenditures are better or worse than spending more on health care. Nuclear weapons or cigarettes, for example, may be "bad" things in other contexts, but they are counted in totaling the GPD just like expenditure for medicines and food.

Overall, perhaps it's time to accept that the shift that is taking place in the health care share of GDP is inevitable. The aging baby boomers will reshape our expenditure patterns as they did when we built thousands of schools to accommodate them as children. People are living longer and technology will provide new life preserving and enhancing solutions to disease. It's no surprise that we choose to feel better or to feel less pain. Expenditures on these items are really not that controversial, but the issue of who pays for them is.

There will be other transformations that we cannot foresee in the economy over the next 50 or 75 years. None of us were really prepared for the Internet or smart phones; even television was something of a shock back in the 1950s. One can hope that these new developments represent not only a change in expenditure patterns but also add to the sum total of human happiness.

With health care we can feel pretty confident that this is true and that's saying a lot.
So the argument is really about who pays? Who deals with the ballooning costs and tries to hold them in check? We know that elsewhere public systems produce good health outcomes at lower costs. We also know that Medicare is very inexpensive to operate and is beloved by its elderly recipients. But we have not been prepared as a nation to expand direct public health care, so we have crafted a new system that changes the game somewhat for insurance companies, but still has them and employers as major players. One can only hope that it will work out. The core problem of who pays what and who gets what will not go away. It's as old as politics itself.

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