Impact of the Economy on Health Care

Layoffs, lost benefits and increasing health insurance premiums have left the public and policy makers wondering what health reform means in a tough economy—and what a tough economy means for U.S. health care. A new paper from Changes in Health Care Financing & Organization (HCFO), an initiative of the Robert Wood Johnson Foundation, pulls together research findings to explore how health care is affected by the current economic cycle.

The brief shows that a recession almost immediately leads to loss of coverage for many people. Studies show that a 1.0 percentage point increase in the unemployment rate results in a .59 percentage point increase in the uninsured. While few employers actually drop coverage, they may cut costs by changing the benefit and/or restructuring cost-sharing with employees. Typically, employers in low-wage jobs (or those working in small firms) are most likely to be uninsured after losing their job, but this recession is affecting a broader swath of the workforce.

The effects of the economy also include changes in the demand for (or access to) health care—as well as the financial status of practitioners and health organizations. Reports from across the U.S. describe falling revenues due to decreased demand for less non-urgent or elective care, more patients unable to pay their medical bills, significant losses in investment income, less charitable giving and cuts in state and federal health care funding.