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Posted: January 11, 2010

Health care reform makes good economic sense

Dollar for dollar, it's a great investment

Len Nichols

Coloradans cannot turn on the television without coming face-to-face with the health reform debate in Washington. But with so many conflicting messages from different interest groups, it is hard to know what to believe.

Over the past year, the New America Foundation along with the Center for Colorado's Economic Future at the University of Denver conducted a study called The Future of Colorado Health Care to make sense of the chatter and to answer one fundamental question: do the economic benefits of health reform in Colorado outweigh the costs? We discovered that the answer is yes, health reform is a good investment for Colorado.

Even after accounting for the economic cost of financing reform, this new study demonstrates that it will pay off for Coloradans to expand health coverage and improve the way that care is delivered.

Health reform will stimulate the economy and create jobs. After considering the taxes necessary to finance reform, we found that expanding coverage to all Coloradans would lead to $3.8 billion in new economic output and 23,319 jobs. This is because a $1 investment in health insurance coverage leads to more than $1 in new economic activity.

For example, as doctors provide care to more patients, they will buy more medical supplies. This will translate into increased economic activity in the medical supply industry, as well as in health and non-health related industries that supply goods to the medical supply industry. In addition, expanding coverage would help lower-income Coloradans pay for health care, allowing individuals to spend more of their money on other goods and services in the economy.

The study also demonstrated that businesses and families will spend less on health insurance with reform than they would without it, if we also change the way we both deliver and pay for health care services. Reforming the health care delivery system in order to improve the quality of patient care and control costs could yield between $11 and $38 billion in additional savings. Translation: premiums could be 5.5 to 17 percent lower than they will be without improvements to the way health care services are provided, putting more money in the pockets of consumers and businesses.

Lawmakers in Washington try every day to answer two critical questions: can we "bend the cost curve" to bring the growth of health care costs more in line with the growth of our economy, and can we really afford to finance reform in this economy?

Encouraging answers to both of these questions can be found in Colorado. Thanks to existing public and private collaborative initiatives, Colorado is one of the states best positioned to move forward with health care delivery system reforms and coverage expansion necessary to both increase access to care and help bend the cost curve.

In particular, Colorado is leading the way to a more sustainable health system through integrated systems like Denver Health and cooperative communities like Grand Junction. Denver Health uses technology and efficient care practices to deliver high quality, coordinated care to some of the state's most vulnerable populations.

Meanwhile, Grand Junction capitalizes on its collaborative spirit to align incentives among providers, fostering a culture of coordination and team-based care that delivers some of the lowest-cost, highest quality care in the country. In short, Colorado is blessed with health stakeholder leadership at many levels that proves our nation can deliver better care for less.

Businesses in particular have a lot to gain from a more sustainable health system. In essence, Coloradans are already "paying a health care tax" because steadily increasing health insurance premiums contribute to less take home pay for Colorado workers and less investment in Colorado's economy.

Health reform would make the investment people make in their health care more effective, putting their dollars to work for them. More insured Coloradans will reduce the costs hospitals must shift to businesses to compensate for the unpaid bills of the uninsured, and a more efficient delivery system will slow the rate of health care cost growth. In total, our estimates suggest that comprehensive health reform in Colorado could make employer-sponsored insurance premiums significantly lower - by as much as 24.8 percent - than they would otherwise be in 2019.

Health reform is certainly a shared responsibility -- households, governments, and employers all have unique roles to play. Colorado is poised to lead the way, if its leaders and people are willing to invest in the most effective ways. Although health reform certainly requires an upfront investment, the commitment pays economic dividends down the road.

A preview of the report, The Future of Colorado Health Care, can be found here.

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Len Nichols, a highly respected healthcare economist, directs the Health Policy Program at the New America Foundation, which aims to expand health insurance coverage to all Americans while reining in costs and improving the efficiency of the overall health care system. Before joining New America, Dr. Nichols was the Vice President of the Center for Studying Health System Change, a Principal Research Associate at the Urban Institute, and the Senior Advisor for Health Policy at the Office of Management and Budget during the Clinton reform efforts of 1993-94. He can be reached at nichols@newamerica.net.

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