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Home / News & IndustryManaged Care Insight and Analysis
Updated: October 26, 2010
Paradigm Shift: Healthcare Spending Grows Economy, Saves Money, Study Reports

Americans may be looking at healthcare costs the wrong way.

That’s the conclusion of a North Carolina (NC) State University study that shows not only will healthcare spending be a catalyst for economic growth but government projections of healthcare costs and financing may be unduly pessimistic.

"Healthcare spending should be viewed as an investment in future capital, contributing to a productive workforce, rather than merely as expenditure," said Dr. Al Headen, associate professor of economics at NC State and a co-author of a paper that appeared in the Dec. 15, 2009 issue of Proceedings of the National Academy of Sciences.

The researchers may have history on their side. The Congressional Budget Office substantially overestimated the costs for Medicare and Medicaid from 1994-2004. Their $361 billion estimate turned out to be a $268 billion reality – a 35 percent error.

People are living longer, Headen said, and are retaining their ability to be productive members of society – they are able to work, pay taxes, consume goods, go on vacation and not draw on Medicare. Government projections are not accounting for this trend.

"Our research suggests that if the government’s projections had accounted for this improved productivity, those projections would have been less pessimistic," he added.

One implication of the study’s findings, Headen said, is that "some programs that the government has said will be in deficit in the near future may actually have a surplus, once you account for improved health and productivity. For example, we project a $242 billion surplus for Medicare by 2020, not a deficit."

For more information on North Carolina State University, visit

  This article was taken from:
Healthcare Reimbursement Monitor

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