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Spend More. Pay More?

Blog | 
Economics | 
Policy | 
System Dynamics | 

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 4sight Health Author
David Burda News Editor & Columnist

Dave is 4sight Health’s biggest news junkie, resident journalist and healthcare historian. He began covering healthcare in 1983 and hasn’t stopped since. Dave writes his own column, “Burda on Health,” for us, contributes weekly blog posts, and manages our weekly e-newsletter and weekly podcast, 4sight Friday and 4sight Roundup. 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. Follow Burda on Twitter @DavidRBurda and on LinkedIn.