US HEALTH ECONOMIC FORECASTS ARE SICK?

USA Health Care has a spending budget from government and medical insurance that is 15% ratio to GDP. It employs 16 million people in full and part-time jobs (the same number as are employed in all retail trade). Is it remarkable to consider a nation's propensity to fall sick supports as many jobs as its propensity to go shopping?
Total USA employment is 151 million. 20 million net new jobs are expected over the next decade and a fifth of these in health care (according to US Dept. of Labor forecasts).
Health care has grown faster than other sectors of the economy. Its employment growth over the next decade is only expected to be exceeded by employment growth in all of business services. Health has grown faster than the economy generally and may continue to do so, but some foresee it growing out of all proportion. The Congressional Budget office (CBO) projects health care spending to a ratio of 50% to GDP over the next seven decades and doubling to a third the size of total GDP by the 2030s! It is such projections including massive concomitant increase in national debt that is excercising objectors to Obama's Health Care reform bill (plus private health sector and pharma lobbying, which in this Congressional election year can make unlimited political contributions following a decision by the Supreme Court). The complexity of the facts of health care makes it easy prey for rabble-rousing politics. Both sides of the debate, which is polarising the electorate almost exactly along party lines, claim that a majority of voters oppose the reform. In this political balance statistics and damn lies play a dominating role, none more so than the Congressional Budget Office's forecasts (see www.cbo.gov) for federal debt & deficit. It is in my memory a report very similar to that on future pension costs by the CBO used in the mid-90s CBO attack on Clinton's budget, which also projected that half of national debt and 50% ratio to GDP costs for state pensions by mid-century. That furnished the Republican Party with an attack on Clinton for being negligent of public finances even as he was balancing the budget (before heading for a budget surplus). The current report on health care provides technocratic arguments for attacking Obama's medical insurance plan. CBO reports are authoritative sounding and may be capable of swinging the vote on The Hill, but that is where the realism ends! . One has only to ask, when health spending is 80% labour costs, how it can ever be possible for health care to attain a size of 50% ratio to GDP? Can anyone envisage a USA economy in which one in every 3 or 4 employed works in health care? - maybe 60 million health care jobs in the US total of 280 million jobs by 2080? This is the CBO implication, although its study did not ask questions about jobs. 60 million is 40% of the total of jobs in the USA today. To understand it, that is twice the population of California, twice the economy of France or Italy or the UK as they are today! Could it come about that 5-10% of the US population? Well, a quarter of the population is obese and people over 50 require 5 million surgical procedures. 15% of the USA population will be aged 65 or over by 2025.
Short of mass Euthanasia to save the economy, the CBO has little to offer except a monetary and fiscal cause for general anxiety or inter-generational panic!
This is not about hospitals. There are 6,000 in the USA of which over half are not for profit publicly-owned. Total hospitals budget is about $800 billions (under 6% of GDP) with 1 million beds and handling 40 million admissions (ave. cost $20,000). Hopsitals are less than half the total health care cost.
But, will all health care grow to requiring long term health care necessitating a quarter or more of all jobs to be in health care? CBO's trend projections are silly and artificial. The weaknesses are:
- CBO projects real GDP at steady 2.2% but ignores inflation on amortising debt (an average of 2% in this aspect would transform the debt to GDP ratio projections)
- CBO ignores multiplier/ feedbacks between health revenue & spending in the wider economy
- tax revenue rises in real terms, but spending costs rise with inflation
- interest on fed debt is 3% above inflation (i.e. always above nominal growth?)
The CBO's The Long-Term Budget Outlook, June 2009, on page 26 shows a graph showing excess cost growth + ageing population together costing equivalent to 15% of GDP by 2080. If US economics undergraduates produced this, the professor would send them back to Economics 101 (or advise them to apply for a job at CBO). Reputable economists should look at this charlatanism and publish a strong critique or I fear Obama's medical policy and with it much of his domestic credibility (including at the mid-terms) will be lost. There are many ridiculous assertions in the CBO forecasting reports - my list would be nearly as long as the June '09 report!