The state of the economy five years post-recession, and how it is impacting healthcare.
Since the recession, American healthcare spending, while still growing, has experienced a slowdown in the size of that growth. Healthcare spending grew just 0.8 percent in 2012, a lower rate than in previous years, according to a December analysis by The Commonwealth Fund. Still, Americans spent $2.9 trillion dollars on healthcare last year, or roughly 18 percent of our nation's gross domestic product. By 2022, that figure is expected to rise to nearly 20 percent, and by 2038, it could reach 22 percent, according to the Congressional Budget Office. As a point of comparison, in 1980, healthcare spending made up just 9 percent of the GDP.The healthcare economy as a whole is somewhat reflective of the challenges facing the entire economy; both federal and healthcare spending are on the rise, increasing at rates greater than the GDP.
Here are five or so brief observations on the U.S and healthcare economy, all more fully discussed below. In short, the country has (1) minimally dented the amount of uninsured, (2) added a great deal of taxes, (3) increased the debt levels to record numbers, (4) maintained high unemployment, (5) has more people falling into poverty, and (6) had minimal growth as measured by the GDP.
1. The newly insured. As of mid-April, approximately 7 million Americans had signed up for healthcare coverage through state and federal healthcare exchanges, according to the White House. This number could fluctuate, however, as it is expected some individuals will fail to pay the premiums required to finalize coverage. Of the 7 million to obtain insurance through the healthcare exchanges, 1.4 million already had insurance, 3.9 million were newly enrolled in marketplace plans, and the remaining met Medicaid eligibility requirements, according to a RAND estimate. At the time of the law's passing, there were an estimated 40 million Americans deemed uninsured. While the uninsured rate is lower than it has been in years, taking a step back, there seems to have been a tremendous amount of overhaul and challenges, as well as increased taxes on both individuals and healthcare companies, for a relatively small net gain of approximately 5 to 6 million individuals added to insurance rolls.
2. Unemployment has not returned to pre-recession levels. According to the latest jobs report from the Bureau of Labor Statistics, the unemployment rate hasn't improved all that much since its swift decline following the most recent recession. At the end of March, 10.5 million, or 6.7 percent, of Americans were out of work. This is roughly the same level of unemployment at the end of 2013. The unemployment rate has improved since Oct. 2009, when 1 in 10 Americans were unemployed. Yet, unemployment, which is reflective of the economy overall, has yet to settle back into pre-recession levels. For the four years prior to the recession, unemployment fluctuated between 4.4 and 5.8 percent, suggesting that six years after the subprime mortgage crisis, we still haven't regained the economic foothold of relatively low, and steady, unemployment rates.
While unemployment numbers illustrate our economy's slow recovery, the total employment rate is also interesting to follow. Unfortunately, comparing today's employment numbers to those of 20 or 30 years ago is quite challenging due to significant changes in the makeup of the work force over that time. In total, the number of non-form U.S. employees was approximately 109 million in 1991. Now, that number is closer to 138 million. While this does suggest an increase in the total workforce, a face-value comparison is not appropriate due to the significant growth in families where two adults work outside the home, as well as the growth of the economy, growth in total population and several other factors. In reality, given the fluctuating size of the work force, it is possible that we are better off paying attention to (1) debt vs. GDP, (2) the growth of GDP, and (3) the number of people living in poverty to assess the nation's economic growth and situation.
3. Debt vs. GDP. Despite increase in taxes, the country's overall debt is increasing substantially — by more than $500 billion dollars annually. According to a 2013 CBO report, today's federal debt level is equivalent to approximately 73 percent of GDP, a historical high. In fact, that percentage represents the highest level since World War II and twice the rate of debt-to-GDP at the end of 2007, when debt-to-GDP was just 35 percent. The most recent CBO report, which was released April 14, estimates a slight decline in the annual federal deficit for 2014 (to $492 billion), compared to 2013, due to lower-than-expected spending on defense and other areas. The report, though, warns that without legislative action, debt levels will reach 78 percent of GDP by 2024.
Much of the additional debt taken on by the U.S. government came in response to our most recent economic recession. On one hand, one could argue that after the subprime crisis, the added debt and the steps taken by the U.S. government were necessary to prevent further economic decline. From this perspective, the administration has done a good job stabilizing the economy. The other perspective is that this administration has allowed such a huge increase in national debt, and ultimately, we have little to show for it in terms of total employment numbers and economic growth.
Interestingly, while debt and taxes have gone up, the total number of government employees as a percentage of the population has gone down in the last several years. Specifically, total government employees as a percentage of the population has decreased by 2.8 percent under President Obama's tenure, while rising under President Bush's tenure, according to Forbes' “The Growth of Government 1980 to 2012”.
4. Growth of GDP. The nation's GDP dropped slightly during the economic downturn (2008-2010), but since 2011, has surpassed pre-recession levels, though not drastically. As of Dec. 31, 2013, U.S. GDP was $15.93 trillion. At the end of 2007, GDP was $15 trillion. While the economy has experienced a rebound to pre-recession levels that unemployment has not, the growth of the GDP during the period of Dec. 2008 to Dec. 2013 was just $0.73 trillion; for the five year period from Dec. 2003 to Dec. 2008, the growth was much greater at $1.47 trillion.
More recently, the Commerce Department announced GDP growth for the first quarter of 2014 was just 0.1 percent with seasonal adjustment — making it second-lowest quarter for economic growth among all quarters in the five-year economic recovery. Analysts say the number is low, but shouldn't be considered representative of the entire economy, due in part to the uncharacteristic and extremely cold temperatures experienced by a large swath of the nation during the first few months of the year, according to a Wall Street Journal report. Additionally, and very interestingly, analysts have attributed the very slight economic growth to health spending increases during Q1. Without this uptick in health spending (due possibly to expanded coverage), they argue, GDP would have declined for the quarter.
5. Poverty level. From 2000 to 2012, the percentage of people in poverty increased from 12.2 percent of Americans to 15.9 percent; the number of people also increased from 33.3 to 48.8 million. The percentage of people in the U.S. with income below 50 percent of the poverty line grew from 5 percent to 7 percent during the 12-year period, and the percentage of people with income below 125 percent of the poverty line grew from 16.5 percent to 20.8 percent.
Looking at all these figures, one can begin to see a clearer picture of the American economy. While job numbers and the GDP have recovered to pre-recession levels, the subprime crisis essentially wiped out any opportunity for significant growth during the nation's five-to-six year recovery, which is perhaps why our country has continued to experience a slow rise in poverty and near-poverty, especially for those just on the cusp of the poverty line.
It is a fascinating time to watch the economic situation of the country. In the meantime, there seems to be little choice but for leadership of healthcare systems and businesses to constantly be vigilant and block and tackle to try and maintain a level of stability in their own operations.