By Eve Anderson
October 23, 2012
The impacts of the recession upon the American health economy have been far reaching. Most obviously, loss of employment has led to significant reductions in the numbers of individuals covered through occupational health insurance schemes.
Further, projected growth in healthcare provision has not been achieved. In 2009, spending on health rose only 4%. This percentage, equalling approximate per capita spend of $8,086, represents the lowest level of growth within the National Health Expenditure Accounts for 50 years.
Unemployment and the American Health Economy
With much of America’s health care funded through occupational health insurance schemes, a direct correlation exists between loss of employment and loss of health insurance. As per the Commonwealth Biennial Health Insurance Survey (2010), 57% of Americans who lost their job during the recession period of 2008 to 2010, also lost their health cover.
Unemployment has also denied dependents health insurance. Losses, including linked cover for dependents and above inflationary rises in insurance costs (particularly for elderly and disabled dependents), have led to significant reductions in the numbers of individuals benefiting from third party funded private health cover.
Further, loss of insurance has not been limited to those who have lost employment altogether. The director of the Urban Institute’s Health Policy Center, John Holahan, has highlighted that peoples’ health provisions have also been affected by forced job changes. This, often underrepresented, group of people include non-elderly Americans being forced into part-time or contract work and their dependents.
Though Holahan acknowledges that the Affordable Care Act 2014 will make significant headway in reducing the link between employment and health coverage, he identifies the need to continue to develop mechanisms for supporting individuals in the meantime:
‘It is likely that employer-sponsored insurance will continue to decline because premiums will almost certainly grow faster than wages and salaries and the number of uninsured people is likely to increase’.
America’s Inability to Meet Projected Growth Targets in Health: A Vicious Funding Cycle
With healthcare premiums continuing to increase faster than income levels, individuals are increasingly reducing levels of private cover or relying solely on government provision, such as Medicaid and Medicare. Thus, the government has been forced to directly target increased levels of spending towards basic healthcare provision.
In a vicious cycle, increased pressure on State and Federal governments to fund basic healthcare treatment has reduced the government funds available to grow and develop healthcare services. Thus, though growth in healthcare has remained low during the recession, government spending has increased.
Though, while government funding on healthcare development has slowed, private medical advancement has not stalled. Technological advancements continue to lead to increased life expectancy, improved long-term prognoses and more rigorous treatment plans. Such treatments, however, are not necessarily cost-effective. Advanced medical technologies and innovative drug programs, for example, can end up costing far in excess of either budgeted government spend or an individual’s cumulative insurance premium. Such treatments, therefore, have been directly linked to rising health insurance costs, which, for many, cannot be met, nor used to support the private health economy.
Recognizing the Role of Healthcare Provision in Economic Recovery: The American Recovery and Reinvestment Act 2009
This legislation, commonly termed the ‘economic stimulus act’, directed $787 billion of government money collected through taxation towards economic regeneration. Of the $787 billion, $149 billion was earmarked for investment in healthcare.
Medicaid, allocated $89 billion of the total $149 billion spend, was the biggest recipient. Established to provide reduced or free healthcare insurance to those who are unable to pay, Medicaid has been heavily subsidized during the recession. The money, which has been used to provide temporary Federal assistance to State Medicaid programs, has enabled the provision of some publicly funded health insurance provision to continue.
COBRA, allocated $25 billion of the total $149 billion spend, was another significant recipient. This money was used to provide a health insurance premium subsidy to those who lost their jobs during the recession. The subsidy (65% of premium) provided significant relief for those who were unable to sustain payment of their COBRA insurance premiums whilst unable to find work.
Beyond support with medical insurance premiums, the act also directed funds towards medical technology and research. $19.2 Billion was directed towards the establishment of a national health IT system and $17.8 billion was directed towards several scientific health research and development projects.
Beyond the American Recovery and Investment Act 2009
As the time periods for Federal support under the economic stimulus act come to an end, and the transition towards the Affordable Care Act continues, States face increasing uncertainty over how and whether to fund treatments under Medicaid programs.
A recent report by Moody’s Investment Service identified three key risk areas facing America’s not-for profit healthcare services. First, the report identified the potential difficulties for not-for-profit providers in raising capital. Second, the report recognized the likely difficulties faced by providers in securing satisfactory insurance reimbursement. Finally, the report identified the risk that States may use the Supreme Court ruling on healthcare reform to opt out of further Medicaid enrollment programs. As per Steingart:
‘By limiting expansion of Medicaid coverage, the ruling blunts the impact of one of the law’s few credit positive features’.