Income Disparity and the One Trillion Dollar Toll
Updated: Apr 7
The Great Equalizer - Good Health - What's More Important Than That?
Income disparity is arguably one of the top social/economic issues facing societies today. This is especially true in the United States where disparity of family income is undeniably the most skewed in the western world (GINI Index based on latest available statistics).
The U.S. GDP, valued at 17.97 trillion ranks third in purchasing power parity behind China’s 19.51 trillion and the EU’s 19.18 trillion. Considering China’s population of 1.36 billion, the EU’s 514 million and the U.S.’s 321 million inhabitants, U.S. production is impressive. But it’s what those goods and services yield to society that matters. In the U.S. over three trillion dollars of the GDP is derived from healthcare. Of this total, at least one trillion is a regressive toll; a tax that exacerbates income disparity, hurts U.S. competitiveness, and returns negative yields to society. It is not sustainable. How is this one trillion dollar toll calculated? It is the difference between what the U.S. spends on healthcare per GDP compared to our western counterparts.
Healthcare expenditures in the United States as a percentage of GDP peaked in 2010 at 17.9% before falling to a current level of 17.1% (2015 est.). Despite this downward trend, U.S. outlays remain by far the highest in the world.
Other developed countries healthcare expenditures as a percentage of GDP are:
France 11.7%, Germany 11.3%, Canada 10.9%, Japan 10.3%, Sweden 9.7%, Australia 9.4, U.K. 9.1%, Cuba 8.8%, Israel 7.2%, Iran 6.7%, Russia 6.5%, and China 5.6%.
Averaging just the western powers France, Germany, Canada, Japan, Sweden, Australia and the U.K. comes to 10.34% of GDP—meaning the U.S. spends a staggering 60% more than our peers.
In fairness, comparing nations’ healthcare costs/outcomes is not the equivalent of evaluating a golden delicious apple against another golden delicious apple. Each country has unique attributes: obesity levels, median age, youth dependency, elderly dependency and total dependency rates. However, contrasting nations is not apples to oranges; it’s more like comparing (Gala, Honeycrisp, and Granny Smith) apples. Thus, costs and outcomes can be reasonably assessed. What makes U.S. results so unnerving is that our median age is lower than every country mentioned above except China, Israel, and Iran while our elderly dependency ratio of 22.3% is lower than all of our western competitors; virtually half of Japan’s 43.3%.
However you slice and dice key metrics, the costs and returns to U.S. citizens are disturbing. Obscene adult obesity levels plague the nation. Maternal death rates run 1.5 to 3 times higher than our direct competitors. Infant mortality rates run closer to Russia’s pathetic healthcare outcomes than our allies. Furthermore, life expectancies in the U.S. are one to five years less compared to the U.K, Germany, France, Canada and Japan.
For those who argue it is the price we pay to lead in technology, research, and breakthrough curing drugs, I see your raise. Technology, data, and precision based treatment will ultimately drive down healthcare costs. Even then, our relative returns to society won’t match other nations. Why? Because we refute what every other peer embraces; publicly funded universal insurance. If the U.S. adopted their proven methods and what is arguably the oldest and most powerful financial concept in history, universal insurance, cost-effective preventative examinations would be routine. Instead, we succumb to a corrupt system designed to generate revenues from expensive tests and medicines after disabling diseases, chronic ailments and incapacitating disorders are on set. If world best practices were implemented, more efforts would be directed to social services that encourage healthy lifestyles, saving countless billions over time. Most importantly, budget-busting end of life decisions would become more rational—and humane.
Many will scoff at these suggestions, claiming universal healthcare violates capitalistic principles. I argue our current structure already defiles the free-market; that a cost effective free-market can only be built on top of a socialistic principle—universal insurance. Once in place, if you want to supplemental coverage, purchase premium insurance in an open borders marketplace, and I mean from anywhere in the world—at true risk-adjusted market rates.
Regardless who wins the upcoming election, expect turmoil. In 1980, total public and private spending on healthcare averaged 9.0% of GDP. If Clinton prevails, she promises status quo, to build upon the ACA. Her strategy risks the entire system collapses under its own weight. Cruz vows to launch his own missile day one by tearing up the ACA then delinking healthcare from employment; implosion is sure to follow. As for Trump, expect the unexpected; lawsuits and chaos. Kasich or anyone else from the GOP, it doesn’t matter; see all of the above. Sanders is the only candidate advocating universal care. But can he deliver the message and sway the masses to force change?
In summary, introducing a public option as an alternative choice to private insurance is the most effective policy initiative we can implement to reverse the growing menace of income disparity. If the current level of income disparity continues, anticipate the upper class to become complacent and the disenfranchised to disengage, its’ human nature. The consequences; up and down society, our competitive spirits will be subdued jeopardizing American hegemony. Implementing universal care is not the be-all end-all answer to all our issues. But doing so will reduce costs and redirect monies to other social products and services that better serve society. Then, regardless of wealth or status, everyone will be afforded one of the necessary pillars to thrive in a competitive world—good health. What is more valuable than that? If the proverb “Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime,” is accepted as gospel, then providing basic fundamental healthcare cradle to grave should be too. Status quo is not an option. If income disparity is left unchecked, we risk entering a death spiral—it’s called an “American Spring.”
Keith Bishop is the author of SLOP – The Wild Boar Nation (2013), Dusty the Cat; In Search of Healthcare; A Love Story (2014), and The Republican Bond—Returning Negative Yields (2016)