AIM’s effort to address the health-cost crisis facing employers has been opposed by hospitals, doctors and others who maintain that health care has become a linchpin of the Massachusetts economy and should therefore not be subject to reforms aimed at reducing medical spending.
Cutting health spending too much too fast, the argument goes, risks widespread loss of jobs in one of the few economic sectors that has grown consistently in the face of the recent recession and slow recovery.
But voices inside the health community now seem to agree with AIM that the focus on health-care jobs is misguided.
Harvard University professors Katherine Baicker and Amitabh Chandra write in the New England Journal of Medicine today that rising health-care employment is not a boon if the same outcomes can be achieved with lower employment and fewer resources. Improved efficiency within the health-care industry, they argue, would leave extra money to devote to other important public and private priorities such as education, infrastructure, food, shelter, and retirement savings.
“The bottom line is that employment in the health care sector should be neither a policy goal nor a metric of success. The key policy goals should be to achieve better health outcomes and increase overall economic productivity, so that we can all live healthier and wealthier lives,” Baicker and Chandra conclude in their article entitled “The Health Care Jobs Fallacy.”
“Our ability to ensure access to expensive but beneficial treatment is hampered whenever health care policy is evaluated on the basis of jobs. Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.”
The authors point to mounting evidence that the U.S. health-care system could deliver better care without spending more and that there are tremendous opportunities for improvements in productivity. The evidence, they contend, shows that the increase in resources devoted to health care has not generated commensurate value.
That same evidence has persuaded experts such as Dr. Donald Berwick, the former administrator of the federal Centers for Medicare and Medicaid Services, to conclude that health-cost control will not harm an industry where one-third of all spending is wasted. Berwick wrote recently that the waste includes “overtreatment that helps no patient at all (like treating viral infections with antibiotics), errors and injuries from unsafe care, failures in coordination (such as sending people home from hospitals without supports), needless administrative complexity, failures of price competition, and fraud.”
AIM has called upon the health care industry to reduce the growth of medical spending to two percentage points below overall state economic growth. The average cost paid by employers and workers to insure a single Massachusetts family though a health maintenance organization now stands at $15,864, according to the 2012 AIM Benefits Survey. The cost to insure an individual is $6,000.
Baicker and Chandra acknowledge the consequences of rising health costs for the rest of the economy:
“Salaries for health care jobs are not manufactured out of thin air — they are produced by someone paying higher taxes, a patient paying more for health care, or an employee taking home lower wages because higher health insurance premiums are deducted from his or her paycheck. Additional health care jobs leave Americans with less money to devote to groceries, college tuition, and mortgage payments, and the U.S. government with less money to perform all other governmental functions — including paying teachers, scientists, and social workers,” the article states.
No one seeks to diminish the role that the world-class health care system in Massachusetts plays in the commonwealth’s economy. But the health-care jobs argument illuminates a growing disparity between what New York Times columnist David Brooks recently called the “globalized trade sector” of the economy and a “protected sector” that includes health care, education and government.
The trade sector is made up of manufacturing, retail, service and other companies that face the constant threat of foreign competition and respond by becoming relentlessly dynamic and efficient. The protected sectors “are not compelled by do-or-die pressure” and thus improve productivity at a slower pace. The globalized sector is producing productivity gains but few new jobs, while the protected sector is producing more jobs and few productivity gains.
The apocalyptic predictions of economic harm from health care cost control divert the debate away from a simple fact – you cannot sustain an economy by blindly pouring resources into one of the least productive (if most important) sectors of that economy. We urge Massachusetts lawmakers to remember that spending produces the most benefit when it goes to the most productive economic activity.