Welcome back. Why has the U.S. GDP surpassed other wealthy countries in recent decades? The most common answers to driving “American economic anomalyism” are technological innovation, strong capital markets, large consumer bases and light touch regulation.

However, there are also reasons that are not ideal. The U.S. government has the unique ability to have high fiscal debt and deficits (partially a function of the state of the dollar’s ​​reserve currency). This week, I proposed another: disease.

The role of healthcare in supporting the U.S. economy is often overlooked. The United States is the only developed economy without a universal health coverage system. The United States spends more than 4.5tn on health care every year, and is expected to account for one-fifth of its economy soon. Even per capita, other major countries spend about half of what the United States spends.

Healthcare is the biggest component of U.S. consumers spending on services (much higher than spending on entertainment, dining out and hotels), and it’s headlines about unlimited U.S. consumers.

In the first quarter, U.S. economic growth fell to negative territory in the annual quarter, partly due to the influx of imports related to White House tariff policies. It would look worse if you don’t spend on outpatient and hospital services.

What about the prosperity of American jobs in recent years? The economy has created 3.9 million private sector jobs since the beginning of 2023. More than half comes from health care and social assistance.

According to Ibis World’s Health and Health Insurance, the top five industries ordered on expected revenue this year are health and health insurance; hospitals; commercial real estate; commercial banks; and wholesale of drugs, cosmetics and toilets.

For all investments, the health outcomes in the United States are abnormally poor. Life expectancy at birth is about four years averaged by the peer country. For infants, mothers and avoidable mortality, it ranks at the bottom of the G7.

According to age-adjusted data from the Peterson-KFF health system tracker, Americans are also more likely to have chronic diseases, including obesity, diabetes, asthma, and depression, relative to the average prevalence in wealthy countries.

The disconnect between high health spending and adverse outcomes is important because the former is so prominent in the measurement of U.S. economic activity (and therefore, our understanding of what contributes to the recent U.S. economic anomalyism).

So, what explains the high health spending of the United States relative to other OECD countries? One factor is lower average health, partly due to lifestyle and diet, says Mark Duggan, a health economist at Stanford University. “The rest can be explained with higher prices, more management costs, and higher quantities of intensive and expensive services.”

So one explanation is that the U.S. health care system generates more spending, so the GDP part because Its system and its inefficiency are inefficient. Previous studies estimate that about 25% to 30% of health expenditures may be considered waste.

Regarding prices, centralized health systems tend to have bargaining power to reduce drug costs and have fewer negotiating intermediaries. In the United States, hospital mergers also often result in weaker competition and higher prices for patients without improving care.

U.S. President Donald Trump signed an order last week to cut drug prices to match foreign countries. But the details are still sketchy. In addition, it is possible to consider drugs that may increase the cost rate.

As for administrative costs, Commonwealth Foundation researchers estimate that they can contribute about 30% of the U.S. per capita health expenditure compared to peer countries.

“Hospitals, physicians and other healthcare providers need to invest huge financial and human resources to approve treatment, get reimbursement and negotiate prices,” Duggan said. “Many different payers, such as Medicare, Medicaid, business plans and private insurance that passes the Affordable Care Act, complicate this.”

The U.S. nursing system also perpetuates higher “economic activity” in other ways. One factor is over-treatment, which is partly a function of the expense service insurance model. Examples cited by the study include overuse, unnecessary surgery, and excessive use of antibiotics.

Another component is misdiagnosis. According to a survey by the Commonwealth Fund, patients in the United States are more likely to report people who have had medication or medical errors at some point during the medical period. This usually requires further treatment.

Then there is a risk of insufficient treatment, which is related to the cost. Americans visit doctors less frequently than residents in most other high-income countries. The average length of hospitalizations in the United States is also lower than the OECD average.

"Affordability remains the reason why some Americans do not register for health insurance, and high out-of-pocket expenses have caused nearly half of the workers to skip or delay getting the care they need," the Commonwealth Fund noted. (The per capita health expenditure in the United States is also much higher than the average in wealthy countries.)

To measure, the total employer-funded family health insurance plan in 2024 reached $25,572 (the employee contributed on average nearly 25%). Indeed, some people with chronic conditions need to continue working to maintain their insurance.

In turn, avoiding medical services or only working in a sick situation can ultimately guarantee treatment.

Of course, not all excess health spending in the United States is not productive. At least some people invest more in medical machinery and equipment.

But this does raise an interesting question of whether reducing wasteful medical activities, such as over-management and over-processing incentives, can reduce U.S. GDP (at least in the short term). Last year, I did this thought experiment for FT Alphaville.

Eric Pachman, chief analyst at Bancreek Capital Advisors, has been monitoring healthcare growth through data visualization, warning that determining the industry will have near-term economic downsides anyway. “We are already used to health care and social assistance, adding about 70,000 jobs a month like clockwork,” he said. “How do health workers train and find new jobs?”

In theory, reduced health care spending will release resources that could potentially allocate to other expenses, including higher productivity spending, assuming no profit savings. Over time, workers can also enter other departments. Therefore, there is no reason why the economy should shrink in the long term.

In addition, poor health is a waste of overall U.S. GDP, mainly because it limits labor supply. Goldman Sachs estimates it has reduced U.S. GDP by more than 10%.

Therefore, within the scope of any reform reducing waste and Over time, the U.S. economy will become even better.

Still, a large amount of money is underway for poor health and a self-continuing system. This is a measure of economic activity (as well as other activities and expenditures with lower productivity).

This can be corrected. “In the way of health spending, the value of the decline in mortality is not seen in the national income account,” said Dean Jamison, a professor emeritus of San Francisco, at the University of California’s Global Health Sciences Institute.

In a recent study, researchers, including Jamison, estimated the economic value of reducing avoidable mortality. (They found that the global population is willing to acknowledge one-fifth of its current income in exchange for a year of the lowest mortality rate observed in the longest living countries such as Japan and South Korea.)

For example, take the form between 2000 and 2019 as an example. “The growth of per capita GDP in the United States exceeded that of France, but the value of the decline in the mortality rate in France exceeded that of the United States,” Jamison noted. In fact, the United States looks no exception when adjusting for the relative improvements in reducing mortality risk.

There are some gains here. First, the United States may outperform other wealthy countries in terms of economic activity, but GDP is a deceptive measure of welfare.

Secondly, in order to make the United States healthy again, U.S. Secretary of Health and Human Services Robert F Kennedy Jr will need a plan to consider. hastily cut the risk of recent economic damage without reducing waste or improving health over the long term. According to temporary estimates from the Congressional Budget Office, plans to cut Medicaid dramatically in the 2025 federal budget bill will leave millions of dollars without coverage.

Finally, until the results improve, it is best to retirement habits, i.e. decent work and work figures in U.S. GDP as “healthy.”

Send your rebuttals and ideas to freelunch@ft.com or x @tejparikh90.

Food for thinking

Is the stock market performing worse than it actually is in the news? This column believes that the media's bias against big news events plays a role.