04/09/2009 05:12 am ET Updated May 25, 2011

Health Care and Economic Recovery

A guest post by Karoli Kuns

If our economy is to grow, health care reform must become reality, sooner rather than later. It is no longer realistic to expect this nation's employers -- large and small -- to bear the skyrocketing costs of insuring employees and their families.

Yet there has been a rising swell from some conservative quarters that there is no relationship between the economy and the current state of our health care system.

Here are some facts:

1. Health care spending is growing at an exponential and unprecedented rate, and has grown faster than inflation and wages in recent years. In 2008, health care spending represented 17% of the GDP. If it continues as it is, it's projected to reach 20% of the GDP by 2017. (By comparison, health care spending in Switzerland accounted for 10.9% of GDP, 10.7% in Germany, 9.7% in Canada, and 9.5% in France)

2. The group hit hardest by the costs of health care are young adults, aged 25-34. These are the heart of this nation's workforce now and in years to come.

3. Average out-of-pocket medical debt for those who filed bankruptcies was $12,000. 68% of those who filed for bankruptcy had health insurance, and medical expenses were responsible in part for 50% of bankruptcy filings.

4. Approximately 1.5 million families lose their homes to foreclosure each year because of unaffordable medical costs.

5. Employers' cost for health insurance premiums rose by 5% in 2008. Small employers' (25-100) premiums rose 5.5%. The smallest businesses, representing the largest sector of business in the country, saw premiums rise by 6.8%, even as workers contributed 12% more toward the cost of insurance than in 2007. Health insurance expenses are the fastest growing cost component for employers, outpacing inflation and threatening to outpace profits.

6. Increased employee costs mean less discretionary funds for savings, investment, home purchases, and consumer spending. Increased employer costs decrease profits, funds to expand, and funds for research and development, while limiting the number of jobs an employer can offer.

There is no doubt that home foreclosures and personal bankruptcies are the largest contributing factors to our current economic crisis and bank implosion. We can argue over whether derivatives and selling risk is at the heart of the crisis, but the fact is that if homeowners were not facing foreclosure, those instruments would have continued to function as a profit center and lucrative investment vehicle.

It is axiomatic: If an uninsured homeowner or family member suffers a severe health crisis, they will lose their home, either by fire sale or foreclosure. Without the COBRA subsidy provided in the recently passed American Reinvestment and Recovery Act, nearly 84% of those newly unemployed workers would not have had the means to pay for their insurance on their own (I am one of them), because continuation premiums are often far higher than unemployment benefits. This is particularly true in the case of family coverage.

Any economic recovery is going to involve not only the rehabilitation of existing businesses, but also the growth of new businesses, startups and innovators. The hidden cost of health care is no more obvious than in this sector. As long as employer-based health care insurance is the standard in this country, innovators and self-starters will have to seek employment rather than consider self-employment, simply because they do not have access to affordable health insurance. It is really that simple. For all of the discussion over the auto and banking industry, the truth is that small businesses (1-24 employees) are the heart of this economy, and if new businesses cannot start and have fertile ground in which to grow, the economy will stagnate and die. Our best talent will be stifled in corporate environments, simply because of their need for affordable health care coverage. Options will be limited, creative solutions to difficult problems lost, the potential for the creation of jobs in growth sectors crippled.

Economic recovery and health care reform are inextricably tied together. Every single citizen in this country, every single company doing business here, every single market has the mark of a broken health care system on its struggle to survive.

To take the economy off life support, health care reform must be implemented. We can have a debate about solutions, but let's not waste time debating the problem.

Additional resources:

* Testimony of Cathy Schoen on Underinsured Trends, Health and Financial Risks, and Principles for Reform (2/24/2009 - Charts and full testimony (PDF)
* Commonwealth Fund Comprehensive Suggestions for Insurance, Payment and System reforms
* BusinessWeek: "Want Real Stimulus? Try Universal Health Care"