A few years ago, a relative of mine, an electrician who made a good living laying cable alongside highways, told me that his economic future depended on one thing: his back. He saw what happened to older guys—he meant men in their late thirties—when the pain became unbearable. They either became supervisors or they had to quit. At the time, my relative was about to turn thirty himself, and I remember him saying, “My back is killing me.”
I’ve been thinking about that conversation this week, as President Trump has cajoled and muscled House Republicans in an attempt to get the votes to pass the American Health Care Act, the Paul Ryan-produced bill that was meant to fulfill Trump’s campaign promise to repeal and replace Obama’s Affordable Care Act. The vote on the bill was postponed on Thursday, in part because the most conservative members of the House, known as the Freedom Caucus, believe that the bill shouldn’t mandate that insurance cover essential benefits, such as preventative and prenatal care, emergency-room visits, pharmaceuticals, and other elements that most Americans consider, well, essential. The idea, they argue, is that the government shouldn’t force citizens to pay for the health care of other citizens through mandatory insurance or other penalties.
My relative’s story made me think that the Republicans have a basic misunderstanding about how health interacts with our economy. In economics, when a person has some money, they can do one of two things: invest it or use it to buy something they want to consume. Most of the time, they consume. That can mean buying a slice of pizza, or “consuming” a vacation, a movie, or a new car. Health care is typically classified as a form of consumption. But if my relative spent some of his money with a back-pain specialist, who could teach him exercises that would prolong his working life by another decade, shouldn’t that be considered an investment? He would be choosing to forego paying for something that he actually wants today so that he can make more money in the future.
When gross domestic product was first defined, in the nineteen-forties, by the economist Simon Kuznets, the goal was to find one simple measure that could serve as a thermometer for the economy: when the number rose, things were probably going better than when the number fell. Kuznets, of course, knew that this was an oversimplification, but a helpful one. Of all the countless ways people make and spend money, Kuznets identified three categories that he believed could cover everything: consumption, investment, and government spending. (He also included exports and subtracted imports, to limit G.D.P. to economic activity within one country, but that’s another story.) When he devised the number, health-care expenditure was minuscule, making up about 0.4 per cent of the over-all G.D.P. There seemed no reason to carve it out as its own category. Today, health spending makes up more than seventeen per cent of G.D.P. That spending is divided into the major categories. You “consume” cancer treatments or a checkup or a week in the hospital. A hospital might invest in a new M.R.I. machine or a cardiac-treatment wing. And the government spends money through Medicare, Medicaid, and the Veterans Administration, among other ways. Health care is the single largest government expenditure by quite a lot, typically nearly double the defense budget. However, dividing health expenditures into these categories misses an important economic reality: health-care spending has a substantial impact on every other sort of economic activity.
As my relative’s situation makes clear, much health-care consumption is perhaps better classified as an investment. As it happens, my relative didn’t get his back properly treated. He took medicine, and then illegal drugs, to treat his pain. That led to an addiction, which led to crime; he is in prison now, and costing the government tens of thousands of dollars a year. When he gets out, it seems unlikely that he will ever earn as much as he would have had he received basic preventative care when his pain first began. It would be wrong to blame all his troubles on health care, but failing to invest in proper treatment when it was needed helped transform one citizen from a hard-working taxpayer into a possible lifelong recipient of government largesse.
In 1993, the economic historian Robert Fogel wrote an influential paper (it was his Nobel Prize acceptance speech) in which he demonstrated that improvements in health accounted for fully half of the economic growth in the United Kingdom in the first two centuries of the industrial revolution. Because of improvements in sanitation, food production, and medical treatment, people were living longer and spending much less time incapacitated by illness and hunger. Health was more important than railroads, electricity, mass production, and every other technology we more readily associate with economic success.
The flip side is true as well. A new paper by the Princeton economists Anne Case and Angus Deaton (another Nobel Prize winner) shows the intertwining nature of health and economics. The paper demonstrates that health suffers dramatically as one’s job prospects dim, and highlights an increase in what they call “Deaths of Despair,” including drug overdoses, suicides, and alcohol-related liver mortality, among older white men since 1999. There is a horrible feedback loop, in which poor health can lead to bad economic outcomes—which, in turn, worsen health.
Sometimes the debates about health care in Washington can seem absurd, as if politicians have the ability to engineer our health economy with precision. The truth is that, no matter what insurance schemes are designed by Congress, we cannot avoid sharing the costs and benefits of health care. If we deny someone care today, we will be paying that cost later, in the form of more expensive treatment or lost years of productive employment. (This is most abundantly true with prenatal treatment and the care of young children, in which relatively modest expenditures today can pay off dividends for a lifetime.) If we make health care less available, we will all live in a poorer nation. Certainly, plenty of health-care dollars are wasted, and there are sensible changes to the system that would improve the cost-effectiveness of care. But, as a rule, abundant access to decent, essential health care is an investment with some of the greatest returns.