NCPA - National Center for Policy Analysis


June 2, 2009

The White House, trying to build the case for a health care overhaul, has released what it calls "the economic case for health care reform."  Billed as a "comprehensive analysis" by the president's Council of Economic Advisers (CEA), the report asserts that by slowing the rise of health care costs through the overhaul would pay off in a big way for the U.S. economy.

  • Health care spending now totals about 18 percent of the country's entire economic output and is projected to reach one third of the gross domestic product by 2040.
  • The CEA says that reducing the rise in health care costs by 1.5 percentage points a year would increase the real gross domestic product (GDP) by 2 percent in 2020 and nearly 8 percent in 2030.
  • That means families would have more disposable income, since less of it would be going to health care -- $2,600 more in 2020 and almost $10,000 more by 2030.


  • Slowing the growth rate of health care costs will prevent disastrous increases in the Federal budget deficit.
  • Controlling health care spending would lower the unemployment rate by 0.25 percentage points for several years, would help keep the federal budget deficit under control.
  • Reform would likely increase labor supply, remove unnecessary barriers to job mobility, and help to "level the playing field" between large and small businesses.

Moreover, the CEA argues that extending insurance coverage to the uninsured would increase "net economic well-being" by about $100 billion a year, about 0.67 percent of GDP.  Lowering health costs would also reduce pressure on government budgets, leaving more room for other priorities such as education.

Source: Editorial, "The Economic Case for Health Care Reform," Wall Street Journal, June 2, 2009; based upon: Council of Economic Advisers, "The Economic Case for Health Care Reform," Executive Office of the President, June 2, 2009.

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