'No' To The Bailout and 'Yes' to Healthcare

Save Lives Instead of Bankers' Bloated Pay
Michael R. Sesit

Sept. 26 (Bloomberg) -- Now that the U.S. government has proposed bailing out the pin-stripe and Gucci crowd, it's about time it adopted a universal health program for the common folk.

After all, if you're going to socialize financial risk, it isn't a big intellectual leap to conclude that the same ought to be done for health care. It's also morally the right thing to do, especially after George W. Bush's administration decided to have the American taxpayer pick up the tab for the misdeeds of what is probably the wealthiest segment of the population.

Saving someone's life is more uplifting than preserving Morgan Stanley Chief Executive Officer John Mack's bonus. That's right, saving a life. An estimated 22,000 people age 25-64 in the U.S. died in 2006 -- and 137,000 from 2000 through 2006 -- because they lacked health insurance, according to an Urban Institute study in January.

About 41 million people in the U.S. will be uninsured throughout 2008, according to the Henry J. Kaiser Family Foundation. For various reasons, an additional 36 million will go without health insurance for part of the year. That 77 million total represents a quarter of the U.S. population and 94 percent of Germany's. It is also 33 percent larger than Italy's.

In 2006, U.S. health-care spending amounted to 15.3 percent of gross domestic product and $6,714 per capita, according to the Organization for Economic Cooperation and Development. That compares with 11.3 percent of GDP and $4,311 for Switzerland, and 11.1 percent and $3,449 for France. The OECD average was 8.9 percent of GDP and per-capita expenditure of $2,824.

No Universal Coverage

Although the U.S. spends more on health care than other developed countries, it's the only major industrialized nation that doesn't offer comprehensive coverage to all citizens.

Twenty-seven of the 30 OECD member countries offer universal, or near-universal, health coverage. Besides the U.S., only Mexico and Turkey don't. Almost half of all Americans cited the cost of health care as their No. 1 economic concern in a Wall Street Journal-NBC poll last year.

Now for a brief summary of the numbers. The uninsured will pay $30 billion out-of-pocket for health care this year and receive an additional $56 billion in so-called uncompensated care provided by hospitals, community organizations and physicians, according to the Kaiser Family Foundation in Menlo Park, California. Federal and state funds will indirectly cover about $43 billion of that, private charities the rest.

If all uninsured people were to gain insurance coverage and use similar amounts of care as the currently insured, overall costs would increase by $123 billion, the foundation says.

Wall Street Bailouts

Meanwhile, the U.S. Treasury and the Federal Reserve are on the hook for $29 billion of dodgy mortgage securities relating to JPMorgan Chase & Co.'s acquisition of Bear Stearns Cos.; $85 billion for the rescue of American International Group Inc.; and as much as $200 billion to shore up Fannie Mae and Freddie Mac.

In addition, there is Treasury Secretary Henry Paulson's proposed $700 billion bailout fund and whatever losses may result from insuring $3.4 trillion of money-market mutual funds.

Thus, in current dollars, the finance industry's aggregate bailout package could theoretically fund the incremental $123 billion increase needed to achieve universal health coverage for more than eight years.

Other ways the financial-services industry could contribute to a national-health system include an increase in the capital- gains duty, a turnover levy on securities transactions and a more progressive income tax that raises charges on the wealthy. And instead of relieving banks of their ailing mortgage securities, the government should get ownership stakes for taxpayers' contributions, which could later be sold if the bailout succeeds.

$2 Trillion

Then there's the Iraq fiasco, which may eventually cost U.S. taxpayers $1 trillion to $2 trillion. That's eight to 16 times the annual $123 billion incremental figure.

A comprehensive national-health program also makes good business sense for three reasons. First, the lost productivity associated with the poor health and shortened life spans of the uninsured cost the U.S. economy $102 billion to $204 billion in 2006, according to a March report published by the Health Policy Program of the New America Foundation.

"The economic cost imposed on the nation by the uninsured is as much as, and perhaps greater than, the public cost of covering them,'' the authors said.

Two, a national health system would help the U.S. attract investment because it relieves companies of a costly direct expense. This was one motive behind Toyota Motor Corp.'s 2005 decision to build a vehicle plant in Canada, instead of the U.S.

No Incentives

Three, after adjusting health-care spending to reflect America's higher GDP per capita, the U.S. in 2005 still spent more -- $1,645 per individual, or $477 billion -- on health care than peer countries with comprehensive health insurance, even though Americans aren't any sicker than others, according to a study last year by McKinsey & Co.

Much of the higher spending was attributed to the costly administrative structure of the U.S. system and its failure to provide incentives for patients to be value-conscious and for providers "to promote rational supply,'' the firm said.

"Despite higher costs, the United States does not deliver objectively better quality and access for U.S. citizens as a whole, relative to peer countries,'' McKinsey said.

Still, if taxpayers are expected to bail out Wall Street, they ought to demand something for themselves and their fellow citizens.