On the Brink of a Government Shutdown over Obamacare

It is hard to imagine a political strategy less likely to achieve its intended outcome while simultaneously harming the economy than shutting down the government to prevent the implementation of Obamacare.

But that probably won’t stop Senator Ted Cruz from trying.  And unless cooler Congressional heads prevail this week, while he will do no real harm to Obamacare, he may well do harm to the economy.

Obamacare is the law, shutdown or not.  And no matter what, on Tuesday you will still be able to go to any hospital in the country and get treated, your doctor’s office will still be open, and your insurance company will still expect you to pay your premium.

But when the government is shut down, the stock market suffers. 

And a few points on the downside in our stock market that are attributable to a single event may be more significant than you think.

Let’s go back to 1995.  The Newt Gingrich-led House shut down the government twice – on November 14, 1995 for a week and on December 16, 1995 for three weeks.

Until then, 1995 had been a boom year for the U.S. economy.  The S&P Index rose 34 percent for the year.  But on the day of the first shutdown, the S&P was down 3 points, or one-half of one percent.  And on the next trading day after the second shutdown, it crashed 9 points, or 1.5 percent.

What is a one-half of one percent drop in the markets worth today?   

We can do the math for Senator Cruz.

At the end of 2012, the total market value of every company listed on our U.S. stock markets was $18.6 trillion.  The markets are even higher now, so we can estimate that today all those companies combined are worth around $20 trillion.

So one half of one percent – or about 9 points on today’s S&P – would subtract around $100 billion from the value of those companies.  That is roughly equivalent to the annual cost of Obamacare!

So isn’t it ironic?  A shutdown won’t shut down Obamacare, but it could hit businesses harder in one day than Obamacare would in an entire year.  And that’s on the conservative side.

People like Senator Cruz don’t want to think about this, so they might look at it another way.

They will tell you that we spend around $3 trillion annually on health and healthcare in the United States.  That is about 15 percent of the market value of all of the companies that are publicly traded on our stock exchanges.  They will argue that this is way too high.

I agree. We can probably do it much less expensively if we put more resources into prevention and public health, like other countries do.

Of those $3 trillion, federal state, and local governments directly or indirectly pay about 71 percent of the bill.  We pay another 12 percent out of pocket.  The remainder is paid by privately funded private health insurance.

So can Senator Cruz assume that if we repeal Obamacare, we won’t have to pay that 71 percent?  The answer is no, because these are pre-Obamacare percentages.

And what effect will this government takeover of healthcare formerly known as Obamacare have on these percentages?

Thegovernment’s share might go up 2 or 3 percent, private insurers might pay 1 percent less, and our out-of-pocket share will go down a couple of percentage points.

It is hardly seems worth working up a Congressional lather over this.

But consider something to which all members of Congress ought to be paying attention. 

If our stock market were to go down just 1.5 percent because of a shutdown, as it did after the last shutdown, then $300 billion will be lost to publicly-traded American companies.  That is equal to the total market value of every publicly traded company in Belgium, Turkey, or Chile.  It is twice the market value of every publicly-traded company combined in Israel, and three times the market value of all the publicly-traded companies in Ireland, Austria, or Kuwait.

Remember the years-long effect that the collapse of the Greek economy has had on the European and world economy?  $300 billion is approximately four times the total value of every publicly-traded company in Greece before the meltdown.

That’s something to think about on the brink of a shutdown.

Paul Gionfriddo via email: gionfriddopaul@gmail.com.  Twitter: @pgionfriddo.  Facebook: www.facebook.com/paul.gionfriddo.  LinkedIn:  www.linkedin.com/in/paulgionfriddo/

Socialized Medicine in America

If there were an award given for the worst health policy exaggeration of 2011, it might well go to Newt Gingrich, Mitt Romney, Rick Perry, and a chorus of others who call the Affordable Care Act “a government takeover of health care.”

They make this charge to capture votes from a constituency that fears what life would be like if we had “socialized medicine.” 

The problem with the rhetoric is this.  It isn't true.  If you look at who pays the bill, the United States already has socialized medicine. We just get less for our money than practically anyone else in the world.

According new data from the Organisation for Economic Cooperation and Development (OECD), no other country spends close to what our government alone does on health care.  Right now, the total government share of our annual per capita health care bill is around $6,000, or over 70% of the total. 

Norway is next most expensive, but its total per capita bill is $5,352.  The government share is $4,501.  In Denmark, the government pays only $3,696 annually, and in the United Kingdom, our poster child for socialized medicine, it pays just $2,933.

There are more relevant comparisons to make, too.  According to OECD, the Canadian government’s share of its annual health care bill is 71% - exactly what ours comes to when you add in all our government costs (the OECD does not in its data reporting, which makes our government share – though still second-highest among the nations – look artificially small).  Health care costs much less in Canada than it does here, however.  The Canadian government spends only about half ($3,080 per capita) as much as ours on health care.

What are we getting for all this government spending?  Fewer doctor visits, shorter hospital stays, and less access to mental health care.

We get an average of 3.9 visits to doctors each year here, compared to 7.7 in Germany, 5.5 in the United Kingdom, and 5.5 in Canada.  People in Italy, Switzerland, and Denmark also get more doctor visits than we do.

Our average length of stay for an acute care hospital visit is 5.4 days.  In Canada, they get 7.7 days, in Germany and Switzerland, they get 7.5 days, and in the United Kingdom, they get 6.8.

And we share 2 psychiatric care beds for every 10,000 people.  Canada has 4, Germany has 5, Denmark and the United Kingdom have 6, and Switzerland has 10.

Perhaps we need less health care because we’re healthier in America. 

Only 16% of our population smokes every day, the same percentage as in Canada.  This compares favorably to Norway, Germany, and the United Kingdom, where over 20% of the population are daily smokers.

And while we consume almost 9 liters of alcohol per person per year, citizens of Germany, the United Kingdom, Switzerland, and Denmark all consume far more alcohol than we do.

But if we take better care of ourselves, have shorter hospital stays, and fewer doctor visits, shouldn’t our overall cost of care be lower, not higher, than other countries’? 

Could we be paying for quality?

We have access to a lot of medical technology, but not so much more as to explain why the cost of care is so high here.  For example, we have more MRI machines than any other country in the world, but countries like Greece, Iceland, Korea, and Finland are all beginning to catch up with us. 

And we are in a tight competition with this same set of countries in the availability of other technology.  We have less radiation therapy equipment available to our population than Iceland, fewer mammogram machines than Greece, and not as many CT Scanners as Korea. 

Of course, we don’t usually compare our health care to that in Iceland, Korea, Finland and Greece – and we shouldn’t.  Iceland’s annual total per capita health care expenditure is $3,538, Finland’s is $3,226, Greece’s is around $3,000, and Korea’s is $1,879.

So why is socialized medicine such a mess in America? 

It isn’t, and won’t ever be, on account of the Affordable Care Act’s phantom “government takeover.” 

It’s more likely because politicians pretend that private insurers play a bigger role in financing health care than they do, and give them too much power over transactions between patients and providers.   

And – unlike other countries with socialized medicine – it’s because we treat health care more as a commodity off which private businesses should profit than a public service we all need.

That’s what exaggerating politicians are really defending.

If you have questions about this column, or wish to receive an email notifying you when future Our Health Policy Matters columns are published, email gionfriddopaul@gmail.com.