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Former Office of Management and Budget (OMB) Director Peter Orszag is sounding a pretty serious alarm about American health care expenses lately. In the current issue of Foreign Affairs, he writes:

“The Congressional Budget Office (CBO) projects that between now and 2050, Medicare, Medicaid, and other federal spending on health care will rise from 5.5 percent of GDP [gross domestic product] to more than 12 percent. … It is no exaggeration to say that the United States’ standing in the world depends on its success in constraining this health-care cost explosion; unless it does, the country will eventually face a severe fiscal crisis or a crippling inability to invest in other areas.”

Are health care costs going to cripple America’s economy? Or could the polar opposite be true – that they are they really the overlooked engine of job growth for America’s 21st-century economy?

Consider China, a country transitioning into a modern economy, led by manufacturing. Manufacturing as a percentage of the Chinese economy today dwarfs the percentage from even 20 years ago. At this rate, manufacturing by 2050 will have all but consumed the Chinese economy, crippling its ability to invest in other areas.

It’s not outrageous to say a parallel can be drawn here with American health care.

Consider: One of the major reasons the American health care economy has grown so much is due to demand for life-saving treatments in conjunction with our aging population. The quickening pace of scientific discovery, technological advances and the basic human desire to be cured of disease and to live longer – all are factors. Indeed, in my home state of Massachusetts, health care technology, life sciences and medical device companies are among the top drivers of our economy – and a key reason the recession hasn’t hit this state as hard as others.

Viewed through this lens, health care begins to look like the economy of the future, not solely the “fiscal crisis”-inducing burden we see so consistently in today’s headlines. As the world’s population ages and grows, the demand for quality health care as a chief American export will rise, too.

Admittedly, so much of our health care spending in America (fully one sixth of every dollar spent) is wasted, avoidable or unnecessary. Too many Americans eat poorly, smoke or don’t exercise. The result is high rates of chronic and avoidable diseases that cost enormous amounts of money.

Failures in our health care economy also add to avoidable costs. Studies show that in places where medical providers dominate a market, the limited competition for health insurance creates health care costs that are higher than would otherwise be the case. In some states, like here in Massachusetts, the government says these higher costs may be the result of illegal, cartellike practices.

It’s also true that a great deal of money is wasted on misdiagnosis – treating people for illnesses they don’t have in the first place – and on treatments that don’t match what accepted science calls for. It happens because doctors can’t spend enough time with their patients, information is fragmented, and common knowledge on how to treat a condition isn’t as common as you might think.

The truth is, the bad – and treatable – aspects of health care costs (waste, misdiagnoses, wrong treatments) are what’s causing health care’s fiscal problem. The rest represents a golden opportunity to overhaul and grow our entire economy, perhaps the greatest opportunity we’ve had in 100 years. It is these costs that would help create the engine of growth and innovation that could reshape America’s 21st-century economy.

The challenge for policymakers and businesses is to avoid throwing the baby out with the bathwater – to get rid of the bad, but without destroying the good.

Evan Falchuk is President and Chief Strategy Officer of Best Doctors, Inc. Prior to joining Best Doctors, Inc., in 1999, he was an attorney at the Washington, DC, office of Fried, Frank, Harris, Shriver and Jacobson, where he worked on SEC enforcement cases. This piece originally appeared in the Washington Times.

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