Question

From an economic perspective, explain why health care spending cannot grow greater than overall growth in the economy for an extended period of time without adverse consequences. Specifically:

1. Identify what economic constraints overall and in the healthcare industry will occur if this happens

Answer 1

Answer) The point in discussion here is that without economic growth at pace higher than spending on healthcare,one cannot such spending for long time without having adverse consequences,before we start our argument,consider an example of a Government who is committed to its citizens to provide free or low cost healthcare,wherein they don't have to spend anything or its very less in Governemnt healthcare institutions,now Government in turn are paying a huge cost out of their budget for this,now consider what the world is going through right now ,a pandemic,lot of governments have been hit very hard in terms of revenues from taxes and other economic activities but still they have to pay employees in these government hospitals,they have to provide poor citizens promised subsidy,what it means is that either it compromise with other development projects or give pay cut to employees or put a cap on facility one can avail or put some conditions on who can avail facility,in all cases compromise will be painful and can lead to poor results in both short and long time(consider doctors going on strike for non payment of salary for months,the whole state will be stranded),now having considered an example let us look at the consequences if economic growth pace is not more than healthcare spending pace as follows

• Stalling of development projects-A lot of governments look at healthcare spending as way to have healthier citizens which means more contribution to economy but what if there are no projects because government do not have budgets owing to subsidies,it could lead to high unemployment or worse where a cycle of more spending and less revenue takes place.
• Problem with reversability-Governemnts would never want to take back subsidies or schemes started as it would mean adverse results for Governments in next elections,so once such condition arrives where a choice between subsidy and other areas of governance have to be there,governments go with subsidies.
• We have already talked about employees' salary but another issue is healthcare infrastructure,if economic pace is not higher,how will one spend more on ever increasing infrastructure,the newer technology,newer colleges,research costs which means state will not make any progress in terms of healthcare.
• Final issue I would like to discuss is that of long term impact of such conditions wherein government runs out of budget and an economy which is stagnant is combined with healthcare problems leading to migration or a standard of life where people does not have access to good and affordable healthcare and at same time have little or no income,it could lead to situation of lawlessness and deteriotation of standard of living.

Answer is complete.Thank you!