Health Care Threatens to Overwhelm National Budget

This week, Opportunity 08 takes a closer look at health care, and how the next president should address shortcomings in our health care system.

Faced with the threat of a second veto, Congress again passed a bill to provide health insurance to 10 million lower-income children through the State Children's Health Insurance Program (SCHIP). Once again, President Bush has refused to sign the bill, objecting to the proposed increase in tobacco taxes that would pay for the program.

Supporters of the bill point out that with the proposed tobacco tax covering the cost of the program, SCHIP would not contribute to the federal deficit. They make a good case, as health care threatens to overwhelm the national budget.

In 2008, total health care spending is projected to reach $2.5 trillion, or 17.2 percent of the U.S. Gross Domestic Product. "Health care is the nation's largest—and, in many respects, most important— industry," says Henry Aaron, former assistant secretary at the Department of Health, Education, and Welfare.

"Our health care system spends so much because it treats more patients intensively and with higher technology care than do most other nations. In addition, our financing system is uniquely cumbersome and costly."

As the cost of health care keeps going up – not coincidentally, so does the number of uninsured Americans. That makes health care an emotionally-charged policy area for the 08 Presidential candidates. The challenge is to expand coverage while minimizing budget strain.

Voters will be looking to candidates to address health system shortcomings including the need to improve access, reform Medicare and other financing, improve quality, and tackle medical malpractice reform.

But Aaron also notes the economic benefits of the health care industry. "The dollar value of Americans' improved health over the last three decades approximates the value of all other economic growth combined, and much, though not all, of that gain is traceable to improved health care.

The U.S. health care sector is growing rapidly and on the private side provides jobs for more than 15 million people" Aaron says.

Aaron advises the next president to sustain the Bush administration's efforts to make high-deductible health insurance the norm. He also supports state-level reforms and universal health insurance by means of "Medicare-for-all."

A full version of Aaron's proposal, as well as supporting background material, is available at www.opportunity08.org. [link: http://www.opportunity08.org/Issues/OurProsperity/19/r1/Default.aspx]

About the Expert and the Project

Henry J. Aaron has been a senior fellow at Brookings since 1968. He is an expert on health care cost, financing, and rationing. He served as an assistant secretary at the Department of Health, Education, and Welfare under the Carter Administration. Aaron is a member of the Institute of Medicine.

Opportunity 08 aims to help 2008 presidential candidates and the public focus on critical issues facing the nation, presenting policy ideas on a wide array of domestic and foreign policy questions. The project is committed to providing both independent policy solutions and background material on issues of concern to voters.

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