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August 22, 2019
David Burda
Economics Policy System Dynamics

Spend More. Pay More?

Everyone in healthcare is “all in” on a lot of things these days, and two things that are at or near the top of that list are social determinants of health and population health. The idea is, if you spend more on the former, the latter will improve, overall healthcare spending will go down and everyone will save money.

A new study in Health Affairs challenges that conventional wisdom, and once again reminds us, including the president, that healthcare is a lot more complicated than it seems.

Researchers from the London School of Economics and Political Science and the School of Public Health at Harvard looked at how much high-income countries spend on social services and healthcare services and whether there was any connection between the two.

The high-income countries are 35 countries that are part of the Organization for Economic Cooperation and Development, or OECD.  The researchers defined social spending as the percentage of the countries’ gross domestic product spent on publicly and privately funded social programs in eight areas like family assistance, housing assistance, disability benefits and senior services. They defined healthcare spending as the percentage of the countries’ GDP spent on publicly and privately funded healthcare goods and services. The study period was 1980 through 2015.  

Here’s what they found.

  • The U.S. spent slightly less than the OECD average on social services in 2015: 16.1 percent of GDP versus the OECD average of 17 percent.  Both are up from 11.2 percent in 1980.
  • The U.S. spent nearly double the OECD average of healthcare services in 2015: 16.8 percent of GDP versus the OECD average of 8.8 percent. Both are up from 8.2 percent and 6.1 percent, respectively, in 1980.
  • OECD countries, including the U.S. that spent more on social services over the study period also spent more on healthcare services.
  • As OECD countries, including the U.S., spent more each year on social services over the study period, they also spent more on healthcare services.

“Across the OECD, we found a consistent, positive association between social spending and health care spending,” the researchers said. “Taken together, these results suggest that countries that spend more on social services also spend more on health care.”

The researchers didn’t offer an explanation other than to suggest that a similar motivation—the desire to take care of people who need help—independently leads countries to spend more both. 

Maybe, as the researchers also suggested, spending more on SDOH with specific patient populations will improve their health status and lower their spending on healthcare services.  But, as an overarching plan to lower healthcare spending, addressing SDOH may not be the connected cure that many people think.

“Despite the lack of evidence, policy makers and others have advocated that the US increase its social spending to reduce health care spending, driven by the notion that more social spending can often pay for itself with reductions in health care use and corresponding costs,” the researcher warned. 

If you want to lower healthcare spending and make healthcare services affordable for people again, you need to target them with specific market-based reforms.

Thank you.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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