Healthcare reformers are divided into two camps, as Merrill Goozner ably explains in his latest healthcare blog. One group, primarily focused on achieving universal coverage, assumes that cost control can be dealt with later. The other camp believes we must first restructure our health-care delivery system to bring costs under control. I believe we can and must do both at the same time. But first we have to shed our illusion that health-care reform itself will significantly stimulate the economy. In fact, if it’s done right, it will cost jobs. And if it’s not done right—if all we do is provide government subsidies to make it easier to buy insurance, slap some rules on the health plans, and have the government bargain with drug companies—healthcare reform will fail.
Goozner points out that in this decade, healthcare has been the great engine of job creation, and that it has continued to add jobs even since the financial crisis began. Forty percent of the new jobs created since 2002, when the last recession bottomed out, have been in healthcare, he notes. And in the past year, while the economy as a whole shed 1.5 million jobs, healthcare added about 500,000.
To this I would add that the hospital construction boom is also continuing. “October building starts for hospitals were about the same as September, and not much different from August, which was better than June and July,” says Jim Haughey, chief economist at Norcross, GA-based Reed Construction Data, a subsidiary of Reed Business Information. A recent American Hospital Association survey shows that hospitals plan to build less next year, but the juggernaut has not yet hit a wall.
In his must-read essay, Goozner asks, “Who in the midst of a deep recession will be willing to whack away at medical waste when it is one of the only sectors generating lots of new jobs for fearful Americans?”
President-Elect Obama and his lieutenants certainly don’t view healthcare reform as a job killer. In fact, at a recent press conference Obama said that the absence of reform is costing jobs as large and small employers alike pour money into our overpriced healthcare system rather than into “expanding and creating new jobs.” Obama declared, “If we want to overcome our economic challenges, we must finally address our healthcare challenge.”
MIT economist Jonathan Gruber, whose thinking seems to be aligned with that of the incoming Administration, said in a New York Times op-ed piece that spending more federal money on Medicaid and the State Children’s Health Insurance Plan could free up state funds for infrastructure projects. He also cited the jobs that would be created if Obama’s proposal to spend $50 billion on health IT were approved. Democratic reform proposals that emphasize primary care would create more demand for nurse practitioners, physician assistants, and RNs, he added.
There are a couple of problems with this line of thought, however. First, while throwing more money at health IT would accelerate adoption of electronic medical records, the number of extra software and technical jobs that would be created would be far fewer than the number that would be eliminated as a result of the efficiencies that healthcare providers would gain from computerization. Second, there aren't enough nurses now because our training system can't keep up with demand. It's doubtful that we could end that shortfall quickly. A more fundamental problem is that in a time when money is tight, we can't spend more on health care; we have to figure out how to get more for less.
Both Tom Daschle, who will be leading the reform brigade, and the health-policy experts who recently wrote a report on reform under the aegis of the Center for American Progress, Obama's central think tank, believe that delivery-system reform will be necessary to achieve the Administration's goals. And that means cutting lots of waste out of the system. In this effort, the Obamians will have strong support from employers and AHIP, the insurance industry association. In its latest reform proposal, AHIP called for Congress to set a goal of reducing the growth of healthcare costs by up to 30 percent over five years, which would save about $500 billion. On the other side, as Daschle has acknowledged, there will be fierce opposition from the health care industry to any serious reform effort that will reduce the income or threaten the positions of healthcare providers.
If the Obamians can harness the forces of employers, insurers and consumers to overcome the power of healthcare providers, pharma companies, and device makers, they will have an opportunity to take a giant whack out of the waste and overuse of technology that are chiefly responsible for our healthcare crisis. But if they do so, they will also be slowing the healthcare job engine in communities large and small.
There are ways to overcome this obstacle. For one thing, if Medicare paid less for procedures and more for evaluation and management--and private payers followed suit--the specialty sector would shed jobs, but some of the people laid off, including midlevel practitioners, could be employed in primary care. By planning how to shift people around within healthcare, job losses could be minimized.
Also, healthcare should be viewed within the context of the government's industrial policy. Right now, except in the defense sector, we don't have much of an industrial policy, but Obama has promised to change that. As we develop viable new industries, we should shift people into those areas from healthcare. Of course, that will require a great deal of retraining and education, and there will be dislocations. But in the long run, our economy will be better off as a result.
The point is that we can’t depend on continued growth in a healthcare sector that is rapidly becoming unaffordable to the majority of people. And we can’t ensure the future of America if our economy depends on domestically consumed services rather than on the production of competitive goods and services that can be exported around the world. So let’s stop talking about healthcare as a driver of economic growth and start realizing that the only way to ensure good healthcare for all is to reduce waste and use the money to buy care for those who don’t have it.
