Obamacare: Kill or Cure for Health Care Job Market?
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The Fiscal Times
April 17, 2014

During the Great Recession and in the years that followed, the job market in the U.S. had its legs taken out from under it. Millions of jobs disappeared, across virtually every sector of the economy but one. Throughout even the worst months of the crisis, the health care sector added jobs as reliably as sunrise and sunset.

Last year, however, even as the broader economy showed signs of slowly reviving itself, the health care sector began to stumble. Job growth slowed, and slowed some more, until in January of 2014, for the first time in more than a decade, the Department of Labor reported that in the previous month the health care sector actually lost jobs.

Related: ACA-Friendly States Are Insuring More People

The numbers would later be revised to show a small gain, but the January numbers got the attention of a lot of economists who have been paying close attention to employment in the healthcare sector. Data now shows that after being the bright spot in the labor market for most of the past decade, growth in health care employment has actually lagged the rest of the economy, 1.4 percent compared to 1.7 percent, for the past 12 months, with much of the decline happening in the final months of 2013 and the early part of this year.

“Health Care Costs Are Getting Squeezed, Finally,” was the headline on a column written by former Obama Administration Office of Management and Budget Director Peter Orszag, now vice chairman at Citigroup, when the January numbers were announced. 

Orszag took the slowdown in health care hiring as proof that overall, healthcare prices were coming down, and suggested that the change had much to do with internal reform of a system that he described as “replete with labor-market inefficiencies.” 

He wrote, “Nurse practitioners, physician assistants, pharmacists and occupational therapists, among others, are capable of doing more than they are allowed to do -- and letting them would increase value to consumers. To the extent that work shifts toward these types of health-care providers, employment in the sector can grow without a commensurate rise in costs. Indeed, encouraging this shift is a key way to promote better value in health care.” 

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Orszag didn’t mention the words “Obamacare” or “Affordable Care Act” in his column, but in other media, he was not shy about attributing the declining costs to the president’s health care initiative.

However, what the Affordable Care Act’s long-term effect on employment in the health sector will be remains a matter of debate among economists. 

“Overall the Affordable Care Act should mean more expenditure on health care services,” said economist Harry J. Holzer, a professor at the McCourt School of Public Policy at Georgetown University. 

The recent slowdown in health care hiring, he said, “might be related to pressures to restrain costs. That has occurred and that’s a good thing. Costs are very high in American healthcare relative to anywhere in the world, and outcomes aren’t that impressive. That would suggest that we have a lot of tightening up we could do.” 

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He noted that some of that cost pressure is due to the new health insurance law, which places more of the onus to cut costs on health care providers. 

“If that were the only thing going on, one might expect healthcare employment to continue to be more restrained than it has been,” Holzer said. However, he pointed out, the law will also be pouring a lot of new money and new patients into the system. 

“Inflation and health care costs have been reduced per covered person with insurance,” he said. But as the number of people with insurance increases, he said, there will likely be a considerable uptick in overall health care spending. 

Ani Turner, Deputy Director of the Center for Sustainable Health Spending at the Altarum Institute in Ann Arbor, MI, agreed that the recent decline in health care employment growth might be the calm, well, if not before the storm, then at least a noticeable tailwind. 

Related: CBO Says Obamacare Will Cost Less than Projected 

“It looked like the bottom was dropping out of health employment last month,” she said. But revised numbers made the changes look less dramatic. 

There will definitely be shifts in the marketplace, she said. Particularly when it comes to hospitals. 

“Price growth is very low and one aspect of the ACA is that hospital growth has been dampened,” she said. “And there are pressures working to decrease growth in health employment.” 

However, she said, the increase in the number of insured people with money to spend, which is expected to continue growing as ACA uptake expands, suggests that the slowdown in health care hiring may be short-lived. 

“Six months from now,” she said, “we might be seeing a return to the growth of a couple of years ago.” 

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A longtime reporter on the intersection of the federal government and the private sector, Rob Garver is National Correspondent, based in Washington, D.C. He has written for ProPublica, The New York Times and other publications.