If you are American and you have health insurance, you probably get it from either your employer or some kind of government program. Or possibly both, if the government is your employer.
Almost no one in the US gets health insurance on their own. We can’t afford to buy it and insurers can’t afford to sell it, thanks to our crazy patchwork system. As a result, people fall through the gaps and millions remain uninsured.
Even many who are insured might as well not be, since exorbitant deductibles leave them practically uncovered.
This is both a human problem and an economic problem—human because we don’t want anyone to suffer, and economic because suffering generates societal costs.
The weirdest part: This is a uniquely American problem. Others have solved it. We choose to let it continue… then wonder why our economy won’t grow faster.
Healthcare isn’t our only problem but it’s a big one.
Last week Whole Foods Market, a unit of Amazon (AMZN), announced it would end medical benefits for about 1,900 part-time workers.
This seems harsh, but in fact Whole Foods was unusually generous. Few employers offer benefits to people working as little as 20 hours a week.
Still, Amazon already struggles with image problems over its pay and working conditions. Why generate more bad PR, especially when the amount saved must be a mere drop in the Amazon money river?
I have no visibility into their thinking, but I have a guess. Maybe the amount wasn’t so small, and it was growing.
Those 1,900 workers and their families aren’t a random sample of the population. Some probably took a relatively low-paid, part-time job because they desperately needed the healthcare benefits.
I personally knew someone in a similar situation. He and his wife, both in their early 60s so not yet Medicare eligible, were both on very expensive drugs for chronic (but controllable) health conditions.
Neither could find a full-time job with benefits. The wife found a part-time role that did (not at Whole Foods). She took it, and they both got the drugs they needed. Yay.
Then the hammer dropped. Their presence in that organization’s pool drove the claims ratio through the roof. The insurer raised the rates sharply, and it ended up dropping the plan for everyone. Hundreds of people lost health insurance.
I suspect something like that happened at Whole Foods.
Within that group of 1,900 workers and their dependents, there are probably a few with extremely expensive health conditions. And since employers can’t discriminate, dropping the whole plan is really their only way to control that expense.
Again, this is just a guess, but I think it’s plausible. And it wouldn’t happen in many other countries where access to healthcare doesn’t depend on employers. Everyone is in one giant group, spreading the costs more efficiently.
The other part of the problem is that those drugs are so expensive. Again, this is a problem we in the US are choosing to endure. Other countries don’t have it, at least not as severely.
In 2018, our per capita healthcare spending was $ 10,586. In Japan, it was $ 4,766. In Canada, $ 4,974. In the UK, it was $ 4,070.
Are people in Japan, Canada, and the UK dropping like flies? No. By most any statistic you can find, they are as healthy as Americans and often more so, despite spending far less on their health than we do.
Our extra $ 6,000 or so per person, per year, buys us no additional health. So why do we spend it?
There’s no economic reason. This is politics. The people who get that $ 6,000 from you and me spend some of it buying influence in Washington.
The result: high profits in the healthcare sector (especially pharmaceuticals) and a lot of sick, uninsured or underinsured Americans.
These sick Americans, in turn, contribute less to growing the economy.
GDP growth is simple math: the number of workers x the hours each works x the amount each produces per hour. Our healthcare system reduces all three factors.
Incompatible with Growth
There are lots of ways to solve this. The Affordable Care Act was one attempt, which obviously hasn’t worked as well as envisioned.
Some people want to modify the ACA to repair its shortcomings. Others want some kind of universal “Medicare for All” program. Others want to start over.
Walmart (WMT) is entering the space, just last week opening its first “Walmart Health” center in Dallas, Georgia. It is larger and offers more services than the small clinics in other chain stores.
That may help, but I’m dubious it will change the big picture much. Walmart might actually increase sales of those $ 10,000 a month prescription drugs by diagnosing more patients who need them.
We should consider all these ideas, but meanwhile the US economy will keep struggling. Our healthcare system is incompatible with a sound, growing economy. The Federal Reserve can’t fix this one.
My partner John Mauldin predicts an unprecedented crisis that will lead to the biggest wipeout of wealth in history. Most investors are unaware of the pressure building right now. Learn more here.