How health care costs are squeezing state social spending

Can investments in community conditions reduce health care spending? Not necessarily on a national level, as a recent Health Affairs article by Irene Papanicolas and colleagues found. However, there is evidence that for state governments, rising health care costs are impeding the ability to invest in social factors such as housing, transportation, and social services.

In a Health Affairs Grantwatch blog, Shannon Brownlee and Vikas Saini from the Lown Institute and Benjamin F. Miller from Well Being Trust discuss how state budgets are being squeezed by health care costs and what we can do about it. 

“According to a 2018 projection from the Government Accountability Office (GAO), states will face a “fiscal gap,” driven largely by rising health care expenditures. Health care expenditures are effectively crowding out states’ discretionary capacity to invest in non–health care or social determinants of health. These expenditures include spending on Medicaid and health insurance benefits for state employees and retirees.”

A report from the Lown Institute, supported by Well Being Trust, on California’s budget spending found that spending on health care grew by 146 percent between 2007 and 2018. During that same period, spending on community conditions increased by just 39 percent. Many other states in the same bind; according to a 2018 Government Accountability Office (GAO) report, state spending on health care as a percentage of gross domestic product is predicted to double between 2008 and 2067, while non–health care expenditures are expected to decline by 50 percent.

While rising health care costs are a hot topic in politics, state legislators and policymakers often do not see health care and social spending as connected. “Rarely is the topic of excessive health care spending framed as an opportunity cost, which limits states’ ability to provide other services that can have an even larger impact on population health,” write Brownlee et al. 

This framing issue is not just a California problem; most Americans view access to health insurance as the most important driver of health. We have to convince policymakers and the public that community conditions matter for health just as much as insurance coverage, that “allowing health care costs to continue to rise faster than the rest of the economy not only affects their pocketbooks but also their overall health.”

Read the full piece in Health Affairs Grantwatch!