Is There a Relationship Between Social and Health Spending?

By August 22, 2019 Commentary

As we have discussed before, in analyses that I consider flawed, the United States is viewed as having excessive health spending among developed countries.  That higher spending is almost entirely due to higher prices, and one person’s price is another’s income.  In addition, these analyses don’t appropriately adjust for population characteristics and health behaviors, which may be public health issue, but have to be considered if you are trying to compare performance of health systems.  Recently, with the trend of social determinants of health, some experts have said that social spending in the US is too low, and that is why health spending is so high.  This is BS on its face, as shown in a new Health Affairs study.   (HA Article)   The authors focussed on three questions:  how does the US compare to other developed countries in spending; is there a relationship between less social spending and higher health spending; and if social spending increases over time, does health spending decrease.  Social spending included unemployment benefits, welfare, housing, pensions, education, etc., and included spending from both public and private sources, but administrative expenses of the programs were not included.  Thirty-five Organization for Economic Cooperation and Development countries were included in the analysis.    The authors examined absolute spending in constant 2015 prices in dollars adjusted for purchasing price parity, and they looked at spending as a percent of gross domestic product.  Other variables included were the poverty rate, the elderly rate and the unemployment rate.

Gross domestic product per capita across the countries ranged from $18414 in Mexico to $102,817 in Luxembourg.  The US is above average at $56,701.  The percent of the population over 65 averaged 16.7% across the nations included; and the US is lower at 14.9%.  The poverty rate in the US, 17%, is significantly above the average of 11.2% and the unemployment rate in the US, 5.4%, was lower than the 8.1% average.  Average social spending was 17% of GDP, 2.1% being private spending.  The US was at 16.1% of GDP, but 5.7% of that is private spending.  But on a per capita basis, the US spent $9018 compared to the average of $7308.  Spending for the elderly was the greatest proportion of social spending in all countries and the US was above average on that spending.  The US also spends above average on education at 6.2% of GDP.  When education is included in social spending, the US is well above the OECD average.  In regard to health spending, the US, as we know is way above the international average, in GDP and per capita terms.  Over the last 35 years social spending increased at about .13% of GDP in the US and on average in the comparator countries.  Health spending has also been increasing, but the US has seen a .24% rise per year, while OECD countries on average saw only a .08% annual increase.  Health spending and social spending, as you would expect if you think about it, have a positive correlation; that is the level of each tends to be similar; countries with high health spending also have high social spending and vice versa.  And each form of spending tends to change at the same rate over time, so one isn’t increasing while the other declines or increases at a slower rate.

So pay attention now to the important conclusions.  We don’t underspend on social services, if anything we may overspend.  What we spend on social services has nothing to do with why our health spending is high, other than that as a relatively rich country we apparently have chosen to spend a lot of money on both social services and health care.  We need to address both health spending and social service spending, but the key to doing that is to change the behavior of our citizens; they need to adapt more health behaviors and they need to be focused on education, work and responsibility in family matters.  If we do that, there will be more taxpayers and less need for social spending or health spending.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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