Menu Close

Warren Buffett Just Issued This Warning About the Economics Behind U.S. Healthcare

Famed investor Warren Buffett shocked investors at his annual shareholder meeting in Omaha, Neb., when he issued a dire warning about America’s economy.

“The tax system is not crippling our business around the world,” Buffett claimed on May 6, with regard to the U.S. corporate tax rate being the highest among the world’s industrialized nations at 35%.

Instead, Buffett blamed another threat much more ominous than corporate taxes looming over American businesses: healthcare costs.

According to Buffett, chief executives would be smart to shift their attention away from tax cuts and towards healthcare costs, which are swelling and swallowing profits.

Here’s why…

America’s Got a Healthcare Problem

Today’s corporate tax rates are simply a distraction, not a true impediment to growth, according to Buffett.

“Medical costs are the tapeworm of American economic competitiveness,” said Buffett.

“When American business talks about strangling our competitiveness, or that sort of thing, they’re talking about something that as a percentage of GDP has gone down,” Buffett said. “While medical costs, which are borne to a great extent by business, have swelled.”

Corporate taxes as a percentage of GDP is arguably the best way to measure the burden on businesses. And American businesses, in particular, are feeling the stretch.

Corporate taxes in the United States currently sit at about 1.9% of GDP. In 1995, corporate taxes were about 2% of GDP.

At the same time, healthcare costs as a percentage of GDP have skyrocketed more than 30% over the past 22 years – from 13.1% in 1995 to roughly 17.1% today.

Meanwhile, healthcare costs as a percent of GDP in Germany are only 11.3%; Japan’s are 10.2%, and Britain’s healthcare costs are only 9.1% of GDP. China, the world’s second-largest economy after the United States in terms of GDP, only faces healthcare costs that are 5.5% of its GDP.

And in America, businesses bear a big share of these healthcare costs.

Warren Buffett

Must Read: A Quarter of Americans Drink Contaminated Water – and the Government Doesn’t Care

According to a recent study by the Kaiser Family Foundation, U.S. corporations spend $12,591 on average for coverage of a family of four — up 54% since 2005.

“Medical costs are the tapeworm of American economic competitiveness,” said Buffett.

You see, the business magnate believes America should transition to a different form of healthcare…

Buffett’s Healthcare Fix

According to a May 8 report by The New York Times, Buffett’s longtime business partner Charlie Munger has advocated for a single-payer healthcare system in America, and Buffett is on board.

Under Munger’s single-payer vision, the United States would enact a sort of universal coverage for all citizens, similar to the current Medicaid system, but with an opt-out feature that would allow the wealthy to still get “concierge medicine,” wrote NYT.

“Our bloated healthcare system is a true barrier to America’s world competitiveness as well as the single biggest variable where we keep getting more and more out of whack with the rest of the world,” said Buffett.

And Buffett is not the only high-profile investor suggesting a change…

Others have touted their own fixes to America’s healthcare crisis. Legendary investor and gold bug Peter Schiff touted his own healthcare plan in March, which proposed terminating Medicare and Medicaid programs. And later that month, billionaire businessman Mark Cuban unveiled a single-payer system of his own that would use “free market insurance” plans to set prices.

However, the healthcare crisis in America is not expected to be solved anytime soon, unless Washington finds a compromise.

“On this issue, both parties hate each other so much that neither one can think rationally, and I don’t think that helps, either,” said Munger.

To get full access to all Money Morning content, click here

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and visitors become smarter, more confident investors.

Disclaimer: © 2017 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

The post Warren Buffett Just Issued This Warning About the Economics Behind U.S. Healthcare appeared first on Money Morning – We Make Investing Profitable.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Follow by Email