(From Todd Epp, Northern Plains News)
A recent study by the National Bureau of Economic Research (NBER) reveals that increased medical expenses during the COVID-19 pandemic led to a significant decline in consumer spending across the United States, with pronounced effects in rural states like South Dakota.
The research found that for every $1,000 increase in out-of-pocket medical costs, there was an associated 1.6% decrease in overall consumer spending. This trend was especially evident in areas with limited health infrastructure and higher rates of uninsured residents.
Impact on Rural Communities
South Dakota’s rural communities, already facing challenges in healthcare access, were particularly affected. The South Dakota Association of Healthcare Organizations reported that between March and June 2020, hospitals and nursing homes in the state experienced losses totaling approximately $550 million due to decreased patient volumes and canceled services.
Governor Kristi Noem acknowledged the financial strain on healthcare providers, stating:
“This additional relief will help ensure that our economic engines continue to thrive and our healthcare providers have the resources they need to continue the excellent care they give to our friends, family, and neighbors.”
Broader Economic Consequences
The decline in consumer spending had ripple effects throughout South Dakota’s economy. Small businesses, particularly those in the tourism sector, faced significant downturns. In 2020, the state’s tourism industry saw an 18% decrease in visitor spending, amounting to a $3.4 billion impact on the economy.
Additionally, a study by South Dakota State University examined the impact of COVID-19-related relief packages on food security and expenditures. The research found that while relief packages like SNAP had a significant positive association with food insecurity, programs like P-EBT and Economic Impact Payments helped reduce food insecurity among households during the pandemic.
Looking Ahead
As South Dakota continues to navigate the post-pandemic landscape, understanding the interplay between healthcare costs and economic activity remains crucial. The findings from the NBER study underscore the importance of addressing healthcare affordability to ensure economic resilience, especially in rural communities.
