President Obama’s top economic advisory group issued a report Tuesday making a case for reform of the health-care system, centering on cost containment and expansion of insurance coverage.

The Council of Economic Advisers outlined the current situation, which almost everyone believes is untenable: health care currently takes up around 18% of gross domestic product, and if current trends hold, it could be 34% of the GDP by 2040. There are 46 million Americans without health insurance, and CEA said that number could grow to 72 million in 2040 without changes to the system.

“Americans spend substantially more resources to achieve outcomes that are similar or less good than other developed countries,” the report declared. It noted that the U.S. spends a far larger percentage of its GDP on health care than any other developed country in the world, but its health measures, such as life expectancy, are worse than most or all of the other developed countries.

"There's an aura of inevitability that this is going to happen," said Ron Pollack, executive director of Families USA, a nonprofit liberal-leaning health policy group. "We have never, I think historically, had such a great opportunity to get this done. The President really wants to do it. The five committee chairs are really intent on making this happen -- and happen this year -- and all of the key stakeholder organizations are really trying to cooperate."

The CEA, which is led by Christina Romer, said that slowing the growth rate of health-care costs by 1.5 percentage points a year would increase GDP and cut the federal budget deficit – both fairly straightforward.  But it also said that slower growth rate would lower the unemployment rate by about a quarter of a percentage point.

Then, the CEA said that expanding access of care to the uninsured would result in an increase of $100 billion a year in net economic well-being – that’s around two-thirds of a percent of GDP. It said that would increase their well-being “by substantially more than the cost of insuring them.”

The CEA also said reform “would likely increase labor supply, remove unnecessary barriers to job mobility, and help to ‘level the playing field’ between large and small businesses.

The report indicated that big variations in the cost of health care by region show that inefficiencies exist and can be corrected. It said that up to 30% of health-care costs, or around 5% of GDP, “could be saved without compromising health outcomes.”

It said that payment systems allow for high administrative costs, as well as a lack of focus on outcomes or disease prevention. And it noted that it’s tough for healthy people to find “actuarially reasonable” rates on health insurance because of a lack of information flow.

Small businesses are particularly at a disadvantage, the CEA said, noting that 96% of firms with 50 or more employees offer health-insurance coverage, while only 43% of firms with less than 50 workers offer it.

Small firms are given much higher premiums for the same level of coverage, the CEA said, attributing it to higher administrative costs and concerns by insurers about adverse selection. Adverse selection would be more of a problem with a small firm, because if one person out of 10 has very high health costs, there are fewer other people to spread out the risk, whereas in a company of 500 there would be more people to offset the high-cost person.

"If we do nothing, it means costs will continue to skyrocket for businesses and increasingly they're saying it makes them less competitive," Pollack of Families USA said. "They're dropping coverage or passing it on to the workers. Families are being priced out of health care and of course government is spending a lot of money on Medicare."

The CEA said that a rise in the number of people who are uninsured also raises uncompensated-care costs, which hurt hospitals and insurers as well as other patients.

The CEA named some of the factors it believes contribute most to inefficiency: spending on high-cost, low-value treatments; too little in the way of effective, high-value treatment; patients not receiving care in the most cost-effective manner; large variations in the quality of care given to patients; many preventable medical errors, which worsen outcomes and raise costs; and a complex system with high administrative costs.

The report named seven factors it believes cause many of the problems with the health system:

1) Misplaced provider incentives that reward quantity of care rather than quality or achieving good outcomes, in addition to defensive medicine that doesn’t improve outcomes.

2) Few consumer financial incentives, mainly meaning that consumers don’t feel much of the economic effect of their health-care decisions; they use too much care of more expensive care than they need, because they don’t have to pay most of the costs.

3) Pricing treatments, which is often done inefficiently.

4) Fragmentation, in that some patients receive care from separate and possibly competing groups, rather than from coordinated teams that are aware of each other’s efforts; in addition, the multi-payer system is estimated to cost tens of billions of dollars a year.

5) Lack of information on new treatments, which leaves providers sometimes ignorant of the best new methods and advances.

6) Lack of feedback for physicians, which means they often don’t know how their treatments worked or how their rapport was with patients or anything.

7) Lack of information for consumers, which leaves them without the proper tools needed to make the best care choices for themselves and their families.

The CEA said the way to address health-care reform would be to tackle these issues, as well as combating fraud and abuse.

“The kind of reform that will bring about these economic rewards will not be easy. It will require truly game-changing innovations in many areas. But, if we can bring about such changes, there will be substantial benefits to American households, businesses, and the economy as a whole,” the CEA concluded.

President Obama backed up the CEA report with some remarks on Tuesday about his plans for health-care reform.

"We have a system here in the United States which is spending more per capita… and seeing worse health-care outcomes in many cases," the President said. "This window between now and the August recess is, I think, going to be the make-or-break period" for these changes.

Of course, not everyone is on board with the reform the Administration is planning.

Sen. Mitch McConnell (R-Ky.), the Senate Majority Leader, said Tuesday morning that "Americans need to realize that when someone says 'government option,' what could really occur is a government takeover that could soon lead to government bureaucrats denying and delaying care and telling Americans what kind of care they can have.”

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