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Introduction
Over the past couple of years, countries around the world have been very concern about the different health risks and illnesses discovered every year. Nevertheless, not every country has the same financial capacity to spend for healthcare services. According to the report of the World Health Organization in December 2011, on the average, a highly developed country would spend approximately USD 3,000 per capita while their third world counterparts would barely allocate USD 30 per capita on health (Ke, Saksenaa, & Holly, 2011). Likewise, the disbursement of funds and how the allocation of finances for the purpose of adequately sufficing for health needs varies depending on the countries’ economic development status. This paper would like to discuss the effect of health expenditure on the country’s Gross Domestic Product (GDP).
Understanding the Trend: Health Expenditure
The Organization for Economic Co-operation and Development (OECD) made an interesting analysis of how countries health expenditures grow according to the economic situation. In a statistical analysis that the organization conducted in 2015, the OECD noted that the trend in health spending varies with the current economic situation, as exemplified with how countries allocated their financial resources before, during and after the global economic recession. Quite significantly, these countries had to compromise how much they spend on health to pave the way for other expenditures as indicated by the allocation of the countries’ Gross Domestic Product. It showed that countries tend to limit the amount they spend on health in the wake of the recession (The Organization for Economic Co-operation and Development, 2015). Prior to the recession and during the recession, health spending gradually tapered, averaging a 3.08% growth from 2000-2009. However, by 2010 when the global economic crisis gradually improves, health spending was nearing to 0 until 2012 when there was a gradual increase documented in 2012, noted by a 0.7% increase in health spending. On the other hand, as far as the part of the United States is concerned the rate of health expenditure tracks to only one direction—increasing trend regardless of economic situation. Economic volatility has no significant impact to how the United States allocate funds as far as healthcare is concerned. In fact, in a final reports prepared by the Office of the Assistant Secretary for Planning and Evaluation of the United States Department of Health and Human Services, the United States’ “rate of growth in health care spending in the U.S. has outpaced the growth rate in the gross domestic product (GDP), inflation, and population” (US Department of Health and Human Services, 2015). In fact, in 2005 healthcare spending of the United States was documented to be at USD 2 trillion, accounting for 16% of the country’s total GDP (US Department of Health and Human Services, 2015). Projections assume that in 2015, as the United States reach a health spending of USD 4 trillion, it will account for about 20% of the country’s GDP.
Effect of Health Spending on the National Economy
There are two ways to look at the impact of health spending and budget allocation on a nation’s economy—noting the positive and the negative.
The Negative Effect of Health Spending on the Economy
While there were very little, if any, studies conducted to establish the detrimental effect of budget allocation and health expenditure on the country’s national economy, there were numerous evidence which could suggest how the increased cost of health spending negatively affects the economy, particularly employment. In 2004, a study revealed that businesses and business owners in the United States are hesitant to employ full-time employees because of the large amount of money that the company has to allocate for employee health insurance (Porter, 2004). In fact, paying for the health premiums of its employees took a majority of the company’s earnings. Similar analysis was reported by companies like Starbucks who noted that they spend more on health insurances than they do in acquiring raw materials for their products. Wal-Mart, the largest single retail employer in the United States, (with approximately 1.2 million employees reported that they spend about “$4.7 billion annually on health care and retirement benefits for employees” (US Department of Health and Human Services, 2015).
The Positive Effect of Health Spending on the Economy
While there were reasons to believe that the increasing cost of health spending has a negative impact on employment, there were also studies which suggested some positive impact. One for example if the stimulate job creation in certain sectors (US Department of Health and Human Services, 2015). In 2003, author Mark V. Pauly stated that while the country’s health care spending increases, the same increase has been reflected on how employment rates in the health-related sector like pharmacy and health insurances have also appreciated. Nevertheless, on other private companies and non-health-related sectors employment tapered off because companies thought that they had to cut back with hiring workers because of the equivalent cost in getting health insurances for individual workers.
References
Ke, S., Saksenaa, P., & Holly, A. (2011, December). The Determinants of Health Expenditure: A Country-Level Panel Data Analysis . Retrieved from World Health Organization Website: http://www.who.int/health_financing/documents/report_en_11_deter-he.pdf
Porter, E. (2004, August 19). Rising costs of health benefits cited as factor in slump of jobs. The New York Times, p. n.p.
The Organisation for Economic Co-operation and Development. (2015, July). Focus on Health Spending: OECD Health Statistics 2015. Retrieved from The Organisation for Economic Co-operation and Development Website: http://www.oecd.org/health/health-systems/Focus-Health-Spending-2015.pdf
US Department of Health and Human Services. (2015, May 23). The Effect of Health Care Cost Growth on the U.S. Economy. Retrieved from United States Department of Health and Human Services Website: https://aspe.hhs.gov/sites/default/files/pdf/75441/report.pdf
