Trump’s proposed health spending cuts could wreak economic havoc

The demise of the American Health Care Act leaves the Affordable Care Act (aka Obamacare) in place for now, but the stability of American health care is still in jeopardy.  The Trump Administration has proposed a budget that severely cuts health, education and research spending, which has the potential to seriously impact hospitals and the communities they serve. Let’s take a moment to understand the many benefits—tangible and intangible—these health care organizations provide.

Philadelphia and other major cities are known as “Eds and Meds” clusters, where education, the delivery of health services and medical research are major drivers of the regional economy. Here, 38% of working folks go to a job at a healthcare or academic institution. The indirect benefits of this activity are significant. These sectors hire highly educated workers with a hunger for good food, culture, housing and other amenities—and have the salaries to pay for it. Healthcare and academic institutions dominate the list of the city's largest employers.

The benefits that health-related institutions provide are not limited to cities. For many rural communities, local hospitals are their life blood and soul. When they have fewer than 25 beds and are located more than 35 miles from the nearest other facility, they are called Critical Access Hospitals for the vital care they provide. Without them, towns die as doctors, pharmacies and people move to places where these essential services are more readily available. The challenge is economics—rural hospitals are often unprofitable and can’t survive without significant government support.

Hospitals and similar organizations are called Anchor Institutions. They provide a benefit that extends far beyond access to high-tech healthcare. They support and promote economic vibrancy—a virtuous cycle of a higher quality of life that attracts people and talent, who in turn improve the community for everyone else.

This cycle doesn’t happen entirely on its own. Governmental policy and funding are key catalysts of the Eds and Meds formula. For example, the ACA significantly reduced the amount of uncompensated care hospitals provide by subsidizing the purchase of health insurance by low-income people. People with insurance cards tend to seek timely care that helps avoid expensive catastrophic events. Hospitals don’t have to chase them down for unpaid bills or write off the amount owed to charity.

Federal funds also support the medical research that is a significant part of this region’s success. Even immigration policy provides a boost to the healthcare sector when foreign-born researchers and clinicians fill the highly skilled jobs that often go wanting. This is especially true in rural areas, which often have trouble attracting physicians.

The proposals under consideration in Washington will cut funding for medical research, decrease the number of people with good health insurance, and restrict or deter the immigration of healthcare professionals. The impact will not be isolated to the health sector. Instead, the damage could wreak havoc in the rest of the economy. 

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