NASE News

Report Projects Economic Benefits From Health Care Reform

The President’s Council of Economic Advisers (CEA) recently released a report entitled “The Economic Case for Health Care Reform” outlining the current state of health care in the U.S. and examining the economic impact of health care reform.

The report offered some staggering projections about the future without reform. Currently, 18 percent of GDP in the U.S. is devoted to health care costs and there are 46 million uninsured Americans. Without reform, the report projects that the portion of GDP spent on health care would increase to 34 percent and the number of uninsured Americans would rise to above 72 million respectively by 2040. The report also states that if properly measured, GDP could be more than 2 percent higher in 2020 than it would have been without reform, and almost 8 percent higher in 2030.

The CEA report points out that “workers in small firms are especially vulnerable” to high health care costs, nothing that “almost 96 percent of firms with 50 or more employees offer health insurance as compared with 43 percent of firms that have fewer than 50 workers.” Additionally, the report projects that if the cost of employer-sponsored health insurance premiums continues to grow at current rates, less than 20 percent of small employers will offer coverage by 2040.

The report noted that in many states, small employers and the self-employed are disadvantaged in purchasing health insurance coverage relative to larger firms. Higher premiums can discourage small employers from offering health insurance to employees, potentially reducing the ability of small employers to attract and retain qualified workers. Small employers are also disadvantaged for not offering health insurance because of the preferential tax treatment associated with employer contributions toward health insurance.

The CEA report suggests that key elements of successful health reform are slowing cost growth and expanding coverage. Recommendations for slowing cost growth include reorienting financial incentives toward value instead of volume and reducing fragmentation, while ideas for coverage expansion include ensuring all individuals can purchase coverage regardless of health status and improving health insurance purchasing options for individuals and small employers by creating an insurance exchange for the individual and small-group market.

Read the full report here.