Healthcare: The Trillion Dollar Cost of Doing Nothing

In the middle of heated policy debates, projections of cost to industry and government fly thick and fast. If costs to citizens are mentioned, it's usually in their capacity as taxpayers, as though they weren't otherwise part of the economy. A couple examples from the global warming policy arena put this into sharp relief in a way that emphasizes the urgency of providing affordable health coverage to every American.

First, there's David Roberts' explanation (... with puppies!) of how the Congressional Budget Office undercounts the benefits of lower energy costs from efficiency [1]. Their method counts the promotion of energy efficiency as a cost to the taxpayer, but not a savings to the ratepayer, as though you can make an absolute separation between people who pay taxes and people who pay utility bills.

That may make sense from the CBO's perspective, but not from the perspective of electricity-using members of the public trying to figure out whether new energy legislation benefits them.

Then there's another cost of our current electricity generation infrastructure, and here we're coming back more directly to the topic of health. According to the National Research Council, electricity production, transportation and heating in the US cost the public $120 billion in illness and early mortality in 2005 [2], as reported by McClatchy's Renee Schoof. Half those costs came from the activities of the coal industry.

A report on the American Coalition for Clean Coal Electricity's (ACCCE) recent lobbying against climate legislation [3] indicates that their 48 coal and utility company members made a combined yearly profit of $57 billion in 2007, or about the same amount incurred as public health losses in 2005. This analyst report republished on a message board (and if you have better data, please send it along) suggested that the entire US coal industry, who are not all represented by ACCCE, had a 2005 profit of $67 billion [4].

If you subtract health costs to society from profits accumulated by the coal companies, you're ending up with perhaps a slight net gain. Add in the $9 billion in federal subsidies to the coal industry [5] for 2005, never mind the state and local incentives, the cost to the government and healthcare system of treating these illnesses, the loss in workforce productivity to other industries, and you may wonder if we can afford these 'profits', even if $60 billion worth of human suffering doesn't register as a problem.

If the coal industry is entirely financed by making people sick, where's the benefit to society?

Going back to Schoof's article on utility costs to health [2], here's what was said about the analytic methods: "The dollar amounts were mainly early deaths due to pollution, with the value of each life put at $6 million, consistent with other studies. More than 90 percent of the costs were the statistical cost of early deaths."

Finally, we arrive at a point where we can start fumbling towards some sort of human price tag on doing nothing about our failing healthcare system. This is the Harvard study on health insurance and mortality [6] referred to by Rep. Alan Grayson (D-FL) [7] on the floor of the House, the one finding that, "Lack of health insurance is associated with as many as 44789 deaths per year in the United States."

That $6 million dollar figure used in the coal study multiplied out by 44,789 deaths is in excess of $268 billion dollars.

While many people who managed to avoid an early death would have considerably more than a year to live, we can also guess at the economic benefits of each extra year of life for some perspective. Last year, Time reported that while many private and government run plans worldwide placed a value of $50,000 on a year of human life [8] Stanford economists placed the value of an extra year at $129,000. So let's use those figures for more perspective.

At a value of $50,000, giving an extra year to everyone who dies in a year from lack of health insurance is worth at least $2.2 billion per year. At a value of $129,000 for that same extra year, it's worth $5.8 billion per year. Though realize, this would be cumulative and doesn't represent the whole yearly cost of early death. If someone loses a decade of life, their absence costs us between $500,000 and $1,290,000, at the very least. Every year until the end of their natural lifespan, the cost of their lost year must be added to the totals of those who die in subsequent years.

For comparison, an HCAN analysis puts the net profits of 10 major private health insurers [9] at $12.9 billion. This Reuters article says the whole US healthcare system is worth $2.5 trillion [10]. People who argue against changing the healthcare system are therefore arguing by their own estimates that the profits of a very few outweigh a toll of loss whose extra minimum yearly increment is somewhere between a tenth and a half of those profits.

If I wasn't already a bit nauseated talking about the value of human life in this way, well, it's worse now.

But let's get back to the lifetime costs, because at the point of death, those costs are locked in and lost one way or another. Summing up, our healthcare system lets another 44,000 people die every year, imposing a lifetime cost of $268 billion on American families and the rest of the economy.

Considering that we spend almost twice as much per capita as other developed countries [11] to get these abysmal results, we've barely begun to total the costs.

Any healthcare reform measure that provides every American with access to affordable care while costing less than $268 billion per year is a net profit to the American public. The current versions of the healthcare bill have a target cost to the federal budget of $900 billion over 10 years. If it saved 44,000 lives per year, preventing $2.68 trillion in early deaths, it'd be an absolute bargain for citizens.