Much of the news cycle nowadays is dominated by the Affordable Care Act (ACA) and the impact that changing it will have. However, recently it has emerged that the ACA may not be the only problem with the US health care industry – as a recent report pegs it as the biggest ‘systemic recession risk’ to the US economy.
The healthcare sector is being singled out as a risk is because it is following the textbook boom-then-bust model that has driven past recessions. Essentially due speculation and fallacies lead to over investment that is driven by debt, and when it collapses the effects ripple across the economy.
To be entirely honest the US health care sector isn’t the only one that is building up risky amounts of debt to fuel expansion, even the automotive and technology sectors suffer from the same risk. That being said, unlike those two, the health care sector is more at risk as it accounts for a greater number of jobs.
Health Care Debt Continues to Pile Up
To put it into perspective, since 2009, debt in the US health care sector has soared by 308%. That figure is staggering, especially when compared against the GDP growth over the same period that hovers around 30%.
The majority of the additional debt that has been taken on has been to fuel expansion, with new hospitals, clinics and other health care services emerging over the last few years. Most of these expansions have helped to fuel local economies across the US, but the debt continues to pile up, that means that if a collapse ever takes place it will cause a contraction across all those economies.
Recently, there have already been some signs that hospitals and other health care companies are beginning to recognize the hole that they have put themselves in. Some of the larger companies are scaling back their expansion, selling off underperforming assets, or even laying off staff.
The situation is further complicated by the fact that health care in the US is heavily reliant on debt collection as well as on individuals, insurance firms, and employers. Should the ability of health care companies to collect debt be affected in any way, it could in turn affect their ability to meet their own debt repayments and cause a cascade. Of course, individuals make up only a small portion of the debt collection in the health care industry, but considering how expensive health care is many find themselves in mountains of debt and may require debt consolidation loans for bad credit.
All in all it is certainly a risky situation that could eventually lead to a recession. That being said it is important to note that this need not necessarily be the case. A lot of factors are in play currently, and changes to the ACA, less aggressive expansion in the health care industry, and better debt management could all contribute towards avoiding it.
Article Submitted By Community Writer