An Economic Dilemma - Healthcare Jobs vs. Costs
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An Economic Dilemma – Healthcare Jobs vs. Costs

There’s a growing paradox in our healthcare world: Since the Great Recession hit in 2007, 35 percent of the nation’s job growth has come from the healthcare sector. In the year 2000, healthcare employed 1-in-12 Americans, but now employs 1-in-9, thanks partly to the 2010 Affordable Care Act (ACA). Jobs are critical for any thriving economy, but it appears the U.S. economy has become increasingly dependent on one sector that has proven to be both highly inefficient and dysfunctional.

The dilemma? Maintaining affordable healthcare is not compatible with the health service sector’s job growth strategy.

A recent article in Health Affairs, “What’s Behind 2.5 Million New Health Jobs?” reported that from 2007 through 2016, there was about a 19 percent growth in new healthcare jobs. From this, hospital jobs grew by 11 percent, nursing and residential care by 12 percent, and ambulatory care by 30 percent.

More than half of the $3.4 trillion we spend on healthcare in this country is spent on labor, much of it on those who provide care. However, a growing segment of healthcare jobs come from our increasingly complex ‘system’ that can be described as an administrative nightmare. Data-entry clerks, revenue-cycle analysts and medical billing coders provide busy backroom work to a multitude of payers concerning the procedures that were performed on behalf of patients. Put another way, for every U.S. physician, there are 16 other healthcare workers. Half of those 16 are in administrative and other nonclinical positions. This is becoming a monster of a problem.

According to a report by Organization for Economic Cooperation and Development, administrative costs in the U.S. healthcare ‘system’ are the highest in the industrialized world. While the average global administration cost average is 3 percent, it is almost three times this amount in the U.S. (8 percent).

In Iowa, the Iowa Hospital Association (IHA) serves the advocacy role for 118 hospitals. From this, IHA conducts a frequent report to validate the economic impact hospitals have within their communities, which is presumably performed to counter public concerns or scrutiny about hospital behaviors and outcomes. We are often reminded that “hospitals are the economic engines that employ thousands of Iowans” and “create an enormous economic impact across the state.” In short, hospitals are a vital ‘jobs program’ that provide an economic “multiplier” effect to our communities.

On the surface, the presence of hospital jobs is extremely beneficial to having healthy and productive communities. After all, it does provide a boost to the local economies. But portraying hospital jobs as the “economic engine” in communities may be somewhat disingenuous – if not grossly misguided.

Salaries and benefits for healthcare jobs are essentially funded by those who pay taxes, higher-health premiums and higher out-of-pocket medical costs – all of which consequently result in stunting the growth of take-home pay from other parts of the economy. Having additional healthcare jobs creates a financial void. It reduces monies Americans have available to pay for groceries, mortgages, college tuition and other discretionary items that benefit families – including philanthropic causes. Equally important, local, state and federal governments are hard pressed to find additional money to pay for other critical functions that profoundly affect our communities and the future of our country – namely, our infrastructure and STEM (Science, Technology, Engineering and Math).

The problem with linking healthcare jobs with economic growth is perplexing. If having more healthcare jobs is the end goal because it creates more wealth within our communities, then maybe we should spend more on healthcare and allow the jobs component to flourish. Unfortunately, it’s not that easy. There is an opportunity cost, or trade-off, that will rob other (more efficient) alternative resources within our economy.

Instead of measuring the economic value of healthcare by counting the number of jobs it creates, how about accurately measuring the commensurate value in the outcomes we receive from the jobs we have financed? If we don’t receive greater ‘value’ from the care provided, then why create more jobs – or keep the existing jobs? The arguments made by the healthcare sector, therefore, should not be about job creation and growth, but rather, whether we are using our limited financial resources wisely. If not, we should put those resources to better use. I’m not an economist, but this should spark a basic economic discussion.

Rising employment in healthcare does not correlate with the goal of improving our health and economic well-being. In healthcare, unlike many other sectors of our economy, there are tradeoffs with the amount we can afford. It’s no surprise that the healthcare sector’s lobbying efforts are formidable. According to the Center for Responsive Politics, a nonpartisan research organization, healthcare companies spend millions annually on lobbying efforts to influence government officials and legislators, with the American Hospital Association (AHA) ranking second highest among all healthcare lobbyists (behind the American Medical Association) and fifth highest among all lobbyists since 1998 – a total of $332 million spent by the AHA. In 2016 alone, the AHA spent over $22 million to ‘educate’ public officials. Other health-related organizations, such as Blue Cross and Blue Shield Association, the pharmaceutical industry and the AMA appeared very high on this Top Spenders List.

Despite the U.S. healthcare system being the most expensive in the world, the Commonwealth Fund reports the “U.S. underperforms relative to other countries on most dimensions of performance.” In America, we pay world-class prices for care that cannot be substantiated due largely to lax reporting requirements.

The healthcare sector’s primary purpose is not to be a jobs program, but rather, to safely deliver high-quality care to patients in our communities – and, do so responsibly, efficiently and transparently.

What are your thoughts?

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