Healthcare: its influence and importance in the economy

 In 2014, the UK spent £179 billion on healthcare. This totalled 10% of the UK’s total GDP.

Interestingly, this was low compared to other countries in the G7. In contrast, healthcare spending consisted of 16.6% of the US’s GDP. Also, US president Donald Trump’s ongoing battle with the House over healthcare reforms shows how valued the health system really is and how important it is to get it right. In this article, I will focus on the impacts healthcare has on the economy.

Good healthcare = good economy
A good healthcare system is vital. It means the population has access to combat illness and therefore, there are no financial burdens, because of healthcare, on the country and the individual, due to a reliable workforce. This generates a thriving economy. For example, the World Health Organisation (WHO) consistently commends France on its healthcare system, and France has a GDP of around 2.8 trillion USD.

The OCED Observer also cements the idea of how the economy depends on a strong healthcare system. Through the data they collected, they state a 10% increase in life expectancy creates an economic growth of around 0.3%-0.4% a year.

Factors such as GDP, healthcare and life expectancy affect a country’s growth. For example, in the UK, national income is relatively high and it has a direct effect on the health system.

Bad healthcare = bad economy = bad healthcare
In contrast, Less Economically Developed Countries (LEDCs) such as Sierra Leone feel the effects of an inefficient healthcare system, and this impacts the economy. For example, 4,000 people in Sierra Leone lost their lives to the Ebola virus, and this correlates with the country having a GDP of $4.1 billion USD.

Due to a poor economy as a result of recessions, civil wars and poverty, many jobs, especially in LEDCs do not require health cover. This weakens the healthcare system because there is less funding being directed into it.

In turn, this means, for example, there will be fewer jobs in the health sector. As a result, hospitals will not have the money and staff they need to take care of patients and no money to update their equipment. People will get illnesses and will not be able to work and this then circles back to a poor economy.

A poor healthcare system also affects the economy in terms of foreign investment through tourism. Many countries rely on the tourism industry to provide a substantial part of their GDP. However, if there is a disease that an LEDC is struggling to contain, and doesn’t have the resources to fight it, the economy will decline as tourists will stay away.

Positive effects of healthcare spending
Economists argue that healthcare spending is a positive. This is because it creates jobs and, in turn, people will spend more on the health system. This was seen during former US president Barack Obama’s time in office.

Obama knew how important healthcare was to the economy. In 2009, he stated that healthcare contributed to one sixth of the US’s GDP. In 2010, the Patient Protection and Affordable Care Act (Obamacare) was passed and a few years later, healthcare spending increased by 3.9% and produced around 500,000 jobs in the sector. This is only one example of how important the healthcare system is to the economy.

Healthcare spending not only relates to government initiatives but to consumers. A reliable healthcare system means people will put their money into the healthcare system, whether that be personal customer costs like insurance, retail items such as prescriptions or a hospital bill. This is good for the economy.

Healthcare spending has to take into account the benefits of technology, in terms of acquiring advanced equipment and educating health professionals on how to use it. This technology includes instruments for non-invasive surgery, which will result in more effective treatment and less suffering for the patient, and software to predict and therefore prevent outbreaks. Evidence suggests that advances in medical technology contribute to a higher life expectancy. As a result, this means people can contribute more to society, without worrying about their health, which can only be a good thing for a country.

Negative effects of healthcare spending
On the other hand, Meredith Rosenthal, Senior Associate Dean for Academic Affairs and Professor of Health Economics and Policy at Harvard, argues that there is a lot of unnecessary spending in healthcare. She argues that 30% of this spending is wasted because of factors including customers not getting the right doctors.

This trial and error process means this money cannot be spent on other things that could potentially help other areas of society.

Also, an increase in healthcare spending means that cuts have to be made elsewhere. A company may invest in better health cover for its employees, but due to budgetary constraints, it might, for example, change its wage structure.

In terms of government, changes in other sectors to fund health initiatives could mean housing issues, a decrease of funding in education or tax reforms.

Each country has its own healthcare system, to which there are positives and negatives.

It can make or break society and this is why it is always an important topic in business as well as in political debates. There are strong opinions on healthcare because the situation is tricky. Spending too much on healthcare means other sectors of industry are affected, while spending too little means the population’s health will suffer.

However, the one thing that can be agreed is that an efficient and reliable healthcare system is an influential factor in establishing a good economy.