Health Care Spending Vs. Social Service Spending

Executive Briefing | by | December 17, 2014


Monica E. Oss
Monica E. Oss

Preparing yesterday’s piece on the question of housing and health care expenses raised the question, “does housing = health care” (see Is Housing Health Care?)? But it also brought into focus the question of spending on health care versus spending on social services.

First was President Clinton’s head of Medicaid and Medicare, Bruce Vladeck’s assertion that people need housing – it just should be paid for as a social service. He said, “It’s not cost-effective….Medicaid is supposed to be health insurance, and not every problem somebody has is a health care problem.” Then there was the preamble to The New England Journal of Medicine article, Housing As Health Care — New York’s Boundary-Crossing Experiment:

Among the countries in the Organization for Economic Cooperation and Development (OECD), the United States ranks first in health care spending but 25th in spending on social services. These are not two unrelated statistics: high spending on the former may result from low spending on the latter. Studies have shown the powerful effects that “social determinants” such as safe housing, healthful food, and opportunities for education and employment have on health. In fact, experts estimate that medical care accounts for only 10% of overall health, with social, environmental, and behavioral factors accounting for the rest.

For me, this raises a few questions:

  1. What is social service spending exactly?
  2. What is the difference between spending in the U.S. on social services and other countries?
  3. If we increase U.S. social service spending, will U.S. health care spending drop?

What is social service spending exactly?  As of 2012, national non-health social service spending in support of low-income persons and families, individuals with disabilities, and the elderly totaled $318.2 billion in the United States.

Federal & State Combined Spending On Non-Health Social Services, 2012

Program

Total Spending (Federal, State, and Local), billions

Food Assistance: Total (All Programs)

$101.9

SNAP

$78.4

School Breakfast Program

$2.1

National School Lunch Program

$11.6

Child/Adult Care Food Program

$2.6

Summer Food Service Program

$0.4

Woman, Infants & Children (WIC)

$6.8

Income Assistance: Total

$131.5

TANF

$31.3

Federal EITC

$62.0

SSI

$52.0

Pell Grant

$33.6

Housing Assistance: Total

$37.4

Tenant-based Rental Assistance

$18.9

Project-based Rental Assistance

$9.3

Public Housing Operating Fund

$3.9

Homeless Assistance Grants

$1.9

Community Development Block Grant Funding

$3.4

TOTAL Non-Health

$318.2

Sources: Spending estimates made by OPEN MINDS based on data compiled from federal agency reports

This included $178.9 billion for income assistance, $101.9 billion for food assistance, and $37.4 billion for housing assistance (see The U.S. Social Services Market: Almost 50 Million Receive Social Support & Over $318 Billion In Spending). By comparison, in 2013 U.S. health care spending increased 3.6 percent to reach $2.9 trillion (see National Health Expenditures 2013 Highlights).

What is the difference between spending in the U.S. on social services and other countries?  OECD countries spend between 20% and 35% of their GDP on health service and social services combined (see Health And Social Services Expenditures: Associations With Health Outcomes), with the high proportion of 37.6% spent by Sweden and the lowest by Mexico at 10.3%. The U.S. sits in the middle of the pack at 29.3%. The difference in the statistics is that the U.S. spends 16% of GDP on health care – the most of any country (the next closest country being Sweden at 12.1%). This makes the U.S. one of the few countries (along with Korea and Mexico) that spend more on health care than on social services.

The “big” question is the last one. If we increase U.S. social service spending, will health care spending drop? This is the theory of public health – particularly the theory of social determinants of health. It is also the pending questions for managers of health plans and ACOs and medical homes. Should health care organizations that are paid based on performance consider paying for non-health care expenses in order to reduce overall costs?

Yesterday I noted that when consumers who are high utilizers of health care services gain supportive housing, average hospital cost savings are $3,022 per person per month, or 86% of prior costs (see Crisis Indicator: Triage Tool for Identifying Homeless Adults in Crisis). In the OECD study,  social services spending (including income supplements, housing, unemployment coverage, support services for older adults, disability and survivor benefits) were significantly associated with better health outcomes, and the ratio of higher social to lower health expenditures was associated with better outcomes in infant mortality, life expectancy and increased potential life years lost, and GDP per capita (see Health And Social Services Expenditures: Associations With Health Outcomes).  But for the most part, evidence is anecdotal or relational at best.

As we move to more of a pay-for-value health care system, the boundaries between health care and social service may be redefined.  For more on the interface between health and social services, check out TACOs, Anyone?, Public Health = Population Health, and IOM Committee Recommends EHRs Track Social & Behavioral Health Domains.


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