Two Trillion Spent on Healthcare Each Year: A Sick Way to Prop Up an Ailing Economy

[marmar]

From AlterNet:


Two Trillion Spent on Healthcare Each Year: A Sick Way to Prop Up an Ailing Economy

By Joshua Holland, AlterNet. Posted July 28, 2007.



Between 2001 and 2006, the healthcare sector added 1.7 million jobs while the rest of the economy added none. So how well is the economy really doing?

For the first four years after the dot-com bust in 2001, a weak economy in most sectors was masked by an explosion in real estate sales, rocketing home values and a surge of consumer spending as people taking advantage of super-low interest rates and easy credit grabbed chunks of equity out of their newly high-priced digs and went shopping.

In the summer of 2005, the New York Times reported that the real estate biz -- "everything from land surveyors to general contractors to loan officers" -- had added 700,000 jobs to the American economy during the previous four years, while the rest of the work force had lost 400,000 jobs over the same period. Technically the economy was in "recovery," when in fact most of it remained soft.

A few economists sounded a warning about having all our eggs in one economic basket. People like Yale's Robert Shiller and Dean Baker at the Center for Economic Policy and Research pointed out that home values weren't syncing up with the fundamentals of the market, and that we were headed for an "adjustment" -- either a real estate crash leading to a recession or, in the best case scenario, a "soft landing."

But while there were some voices of caution, other economists told us that everything was going gangbusters. This was the New Economy in action: American manufacturing may have been gutted during the previous few decades, but the service sector is where more "value" is added anyway -- where the big profits are -- and Americans would be just fine selling each other houses, insurance and the occasional cheeseburger until the Next Big Thing came along.

It was a hot debate, but something else was going on at the same time that got less attention: There was the emergence of what could be called the healthcare economy. As Michael Mandel wrote in Businessweek last September, "Without , the nation's labor market would be in a deep coma." Between 2001 and 2006, 1.7 million new jobs were added in the healthcare sector. Meanwhile, the rest of the private sector added exactly zero new jobs (net) during that period. .......(more)

The complete piece is at: http://www.alternet.org/workplace/58099/

[bluerum]

1. Administrative boondoggles. More and more layers of lower management

are being added by health care companies. These people manage the beats, visit businesses, coordinate with the mother ship and add another layer of bureaucracy between patients and health care providers.

[many a good man]

2. Fascinating article full of good information

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It may also have an indirect impact on wages, which have remained stagnant for most of the working population since 2001. Right-wing economists like Greg Mankiw, the former chairman of Bush's Council of Economic Advisors, who infamously suggested that assembling cheeseburgers at a Stuckies should count as a manufacturing job, argue that looking at wages isn't an honest measure of how workers are doing, because their overall compensation -- including medical and other benefits -- has risen faster than inflation, while wages haven't. Allan Hubbard, another Bush economic advisor, told the Wall Street Journal that "employers are spending more money on healthcare, and that's robbing people of wage increases." The claim is controversial -- corporate profits and executive pay have both increased at the same time, and fewer than half of all American workers get coverage from their employer -- but it is a simple fact that the gap between the cash working Americans are pocketing and the money their employers pay for an hour of their time has been growing. According to a study by the Kaiser Foundation (PDF), workers' pay rose by 18 percent between 2000 and 2006 -- not quite keeping up with the 20 percent total inflation -- but employers' healthcare premiums rose by almost 90 percent.

That last number gets to the heart of the second problem, one that Big Business is becoming increasingly aware of: Those costs are much higher than in other countries and, unlike every other advanced economy in the world, much of the burden is born by U.S. companies instead of being spread across society through a progressive tax system. That puts them at a distinct disadvantage in terms of labor costs, and encourages U.S. firms to offshore and outsource as many jobs as possible. So while the healthcare industry is adding jobs, the spiraling costs create a powerful incentive for other sectors to shed them.