Health Care Jobs Spike Again…Costs Will Follow
Life + Money

Health Care Jobs Spike Again…Costs Will Follow

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The job market is dismal. Nearly a million public employees have lost their jobs over the last two years. Construction remains severely depressed, and millions of Americans are laboring at lower pay because they’re stuck in jobs far below their qualifications.

Yet one sector boasts nothing but blue skies. Health care added 32,800 new jobs last month, just as it added new jobs every month without fail for the past 20 years. Physician offices led the way with 9,900 new slots in May, followed by 5,500 new jobs at nursing homes.

In a month when the economy added just 69,000 new jobs overall, the nation’s health care sector, which represents 17.9 percent of all economic activity, generated nearly half of all the new employment opportunities. If the rest of the economy had added positions at the same pace as health care, there would have been over 300,000 new job openings to celebrate.

None of the economic and political storms of the past quarter century – not the savings and loan collapse; not the 1993-94 health care reform debate; not the bust; not the financial crisis and Great Recession; and not the Affordable Care Act, a.k.a.  Obamacare – has fazed the Great American Health Care Jobs Machine.

Though new jobs are a good thing, few cheer the health care sector’s never-ending upward march. “It is tempting to think that rising health care employment is a boon,” Harvard professors Katherine Baicker and Amitabh Chandra wrote in last week’s New England Journal of Medicine. “But if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities such as education, infrastructure, food, shelter, and retirement savings.”

The latest projections from economists at the Centers for Medicare and Medicaid Services suggest the growth will keep pace with the rest of the economy for two more years. But then it will resume growing faster than GDP. With or without Obamacare, health care will grab nearly 20 percent of the economy by 2021, meaning it will remain a major source of employment opportunities for millions of job seekers.

For those who are more concerned about access to health care than controlling its cost, that makes sense. The Baby Boom generation is entering its high health care cost years. The share of population over 65 and Medicare eligible will grow from 13 percent to 20 percent over the next two decades. One should expect employment to grow at home health agencies, nursing homes and other services aimed mostly at the elderly, they say.

But as health care economists like Baicker and Chandra point out, there is an opportunity cost to higher health care spending. Government spending on care for the poor and elderly requires either higher taxes or cutting elsewhere in government budgets. It also requires that employers pay higher insurance premiums, which takes away dollars from higher wages, better retirement plans and new hiring.

“Every job we produce in health care is financed through government spending and private spending foregone,” Chandra said. “The premiums are even subsidized through the tax code.” A dollar paid in wages is taxed; a dollar paid in health care premiums is exempt from taxation.

Some economists argue that the dollars shifted into health care represent a rational choice by consumers. As society becomes richer, it’s natural that many people will want to spend their hard-earned money on better care or services  so they can live longer, healthier and more productive lives.

But there’s a near-universal consensus that a significant proportion of health care spending is wasted, and in any case is determined for the most part by provider choice, not patient or consumer choice. Some say the waste constitutes as much as a third of total spending.

Moreover, health care experts do not agree on the role that higher spending plays in increasing longevity and better health outcomes. For instance, a 2007 study in NEJM found that half the decrease in deaths from heart disease between 1980 and 2000 was due to reduced smoking, better diets and healthier lifestyles.

And while the other half was due to medical interventions, nearly all of that came from using medications to control risk factors like blood pressure and cholesterol. Expensive coronary interventions like angioplasty, stents and defibrillators accounted for just eight percent of the reduction in coronary deaths.

“There’s a big debate over productivity in health care,” said Paul Ginsburg, executive director of the Center for Studying Health System Change. “A lot of health care is elective and subject to differences in opinion in how it should be used.”

Some reform advocates say Obamacare’s delivery system reforms will succeed in finally throwing sand in the gears of the health care jobs machine. If those reforms are allowed to take hold, hospitals and physician offices – the two major employment centers in health care – will face a very different set of incentives than what existed under traditional fee-for-service medicine, which rewarded volume.

Medicare and insurers are already experimenting with bundled or capitated payments for specific episodes of care. That could lead providers to deliver care with fewer people, since the road to higher profits will run through delivering high-quality care with greater efficiency, not by churning more and more procedures. The architects plan to tie bundled payments to meeting quality standards and outcomes so providers don’t stint on care.

But those reforms are just getting off the ground and could be short-circuited by the U.S. Supreme Court decision on the law’s constitutionality later this month. But if the reforms survive and succeed in bending the cost curve – two very big ifs – “we could have a period of slower job growth,” Ginsburg said, “because there is so much waste in the system.”