According to a UCSD study, stock market declines over the last 30 years cost the state of California approximately $77 million annually.
The correlation between the stock market and health is uncanny. In 2013, Joseph Engelberg and Christopher Parsons, faculty members at the University of California at San Diego, studied the impact of a drop in equity prices and the utilization of healthcare services and presented their paper "Worrying About the Stock Market: Evidence from Hospital Admissions," at the annual meeting of the American Economic Association. Historically, market analysis has focused on investors' psychology and its impact on stock prices. Here, the inverse is considered â what impact do stock market variances have on investor health, with a particular emphasis on mental health?
In order to reach a plausible answer, nearly three decades of daily hospital inpatient data for the state of California was reviewed. While the study authors considered pure economics â "the more quickly that gyrations in stock prices impact an investor's instantaneous utility, the more likely the effect is coming through expectations over future consumption, rather than via current consumption, i.e., through the budget constraint," â they went on to state that greater significance for providers is the utilization of healthcare services, especially in relation to anxiety, panic disorder, or major depression. The study found that, on average, a decrease in stock price of approximately 1.5 percent equated to an increase in hospital utilization of approximately 0.26 percent over the next two days. But, on October 19, 1987, "Black Monday," when the market plummeted by nearly 25 percent, there was over 5 percent increase in hospital admissions. The impact on mental health conditions was nearly twice that of non-mental health conditions, according to the study.
What is the overall cost of a stock market drop in California and the United States overall? The study stated, "In California, 11,665 people are hospitalized each day implying approximately … 3,700 market-induced hospitalizations a year. Combining this with estimates from the 2009 U.S. Census Bureau indicating that a single, average hospitalization event costs roughly $21,000, stock market declines increase healthcare costs by at least $77 million in California, which extrapolates to perhaps $690 million annually in the U.S." The study found that 6 percent of California hospital admissions were for mental health reasons. And, since physicians treat those patients, the potential impact on a physician's practice could be significant depending on the performance of the stock market. Overall, keeping a pulse on the market may help hospitals and physicians project utilization â now, if they can find a good broker to simultaneously engage in options trading, income can increase on two fronts (just kidding).