PARIS, Dec 9 (Reuters) - The U.S. economy will probably get worse before it gets better and will need further injections of public money to help it pull out of trouble, the Organisation for Economic Co-operation and Development said on Tuesday.
Beyond the short term, Washington not only needs to overhaul the financial sector, but also a system of healthcare provision that leaves 46 million people, or 16 percent of the population, unprotected, the OECD said in a report on the U.S. economy.
"The U.S. economy is going through an exceptionally difficult period," the Paris-based organisation said in the report.
"Further fiscal stimulus will be desirable if financial conditions and economic prospects do not quickly improve."
The Paris-based think-tank did not revise its main economic forecasts in a report that primarily expands on policy advice to the world's largest economy, where Barack Obama is promising to roll out the biggest infrastructure investment programme since the 1950s when he takes over as president on Jan. 20.
The report highlighted in particular the failings of healthcare insurance, saying the U.S. system compared poorly with most of the countries in the OECD's 30-country membership.
"With Mexico and Turkey, the United States is the only OECD country that does not get close to universal healthcare insurance," the report said.
"Making progress towards health insurance coverage for all Americans should be given a high priority."
Robert Ford, an OECD economist sent to Washington to present the report's findings at a seminar later on Tuesday, said this was the most important reform from a long-term perspective.
The OECD suggested replacing tax-breaks for job-related health insurance plans with some form of direct subsidy, since the current system did nothing for those not given insurance by their employers and also tended to favour higher earners.
Ford acknowledged that this was an option Obama had shunned during his election campaign.
The OECD also suggested insurance coverage should move away from being priced uniquely on the basis of an individual's health and more towards collective, community-rated pricing.
It urged greater cost efficiency given that Medicare, the health insurance programme catering to those of 65 and over as well as disabled people, currently accounted for about three percent of gross domestic product (GDP) and was expected to rise sharply in future years.
"Some hospitals seem prone to high-cost procedures without additional benefits to patients," the report said.
SHORT-TERM
The report repeated November OECD forecasts for U.S. GDP to drop 0.9 percent next year and expand again in 2010, by 1.6 percent, after a 1.4 percent rise in 2008, and reiterated the OECD's view that the U.S. economy was likely to need further fiscal stimulus to pull through the current sharp downturn.
OECD economist Ford said infrastructure projects, while not always easy to roll out and wind up fast, could do the job, especially if the thrust was to advance programmes that would otherwise have been implemented at a later date.
If it is repairing a bridge and the plan was to do so in 2010 or 2011, doing so in 2009 was a good way of stimulating economic activity in the near term, Ford said by way of example.
"We have nothing against infrastructure per se," Ford told Reuters in a telephone interview. "Our concern is that the need is for stimulus that's immediate."
The OECD also recommended that the system of financial regulation and supervision be beefed up. (Reporting by Brian Love; Editing by Ruth Pitchford)