SRDC Series #202

Measuring the Economic Importance of the Health Sector on a Local Economy-Abstract
November 1996

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Health care issues are being addressed at all governmental levels. National leaders are discussing Me and Medicaid issues. State leaders are addressing Medicaid issues. Community leaders are striving to maint improve health services. Without a viable health sector, rural communities may not have the desired quality economic growth potential. The purpose of this publication is to illustrate the importance of the health secto economy of a rural community and present a simple procedure to measure the impact of the health sector on economy. More specifically, the objectives are to:

1. demonstrate the importance of the health sector on the local economy;
2. summarize the relationship between health care and industrial growth;
3. summarize the relationship between health care and retirement growth; and
4. develop a method that Extension workers can use to measure the impact of the health sector on local economy.

The economic importance of the health sector can be demonstrated by looking at the percent of total employment and gross national product (GNP) associated with health activities. Recent national data show t care expenditures make up about 15% of the U.S. GNP (U.S. Bureau of the Census). The magnitude of heal expenditures as well as the percent of GNP continues to increase. At the community level, generalized data available. In the literature, it is often stated that a rural hospital is often the second largest employer (Doekse and Shaffer). The largest employer is often the school system. If the employment of the hospital is added to health components such as physicians, pharmacies, etc., and the total impact of the health sector is included, generated employment is often 10 to 20 percent of a rural community's employment. The health sector is no important for jobs, but also important if the community is trying to attract industry or retirees. A review of the literature was conducted relative to the impact of the health sector on the economy and its importance for individual growth and retiree attraction.