The New York Times had dueling articles over the past few days about whether or not the business of health care is adversely impacted by a recession.
On one hand, hospitals are seeing a downtick in admissions in the context of the economic crisis. According to the article, patients are delaying elective orthopedic procedures, as well as hernia repairs. This is on top of the decrease in filled prescriptions over the past two quarters.
On the other hand, some business analysts suggest buying stock in health care companies because health care is “recession-proof.”
There has long been an argument about whether health care is a necessity or a luxury good. Necessities have inelastic demand, while luxuries have substantial elasticity of demand.
I’d say that there are elements of health care that are necessities – and these do not fluctuate with the economy. There are obvious elements of health care that are necessities, like repairs of hip fractures (which also have low variation in utilization in different geographic areas). I’d like to say that childhood immunizations would also not decline in an awful economy, but I’m not as confident. There are other types of health care that are unequivocally luxuries – like Botox for cosmetic purposes, or early knee replacements to preserve the ability to play competitive tennis. Of course, almost all health care falls between these two poles.
The worst of all worlds in terms of decreased health care utilization would be a severe economic downturn, such as that faced by Russia after the fall of the Soviet Union, or Argentina after it defaulted on foreign debt. In both instances, utilization of health care dropped dramatically. There was substantial loss of health in Russia as well.
