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Report: The Health Care Jobs Fallacy

Report: The Health Care Jobs Fallacy

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Published by: WBUR on Jun 07, 2012
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1204891 nejm.org
Amid this malaise, the health caresector is one of the few areas of steady growth.
It may seem nat-ural to think that if this sectoris one of the bright spots in theeconomy, public policies shouldaim to foster continued growth inhealth care employment. Indeed,hospitals and other health careorganizations point to the size of their payrolls as evidence that they play an important role in eco-nomic recovery, a role that must not be endangered by reforms that seek to reduce spending on healthcare. Politicians on both sides of the aisle are quick to emphasizethe “job-creating” or “job-killing”aspects of reforms.But this focus on health care jobs is misguided. The goal of im-proving health and economic well-being does not go hand in hand with rising employment in healthcare. It is tempting to think that rising health care employment isa boon, but if the same outcomescan be achieved with lower em-ployment and fewer resources,that leaves extra money to devoteto other important public and pri- vate priorities such as education,infrastructure, food, shelter, andretirement savings.Consider an example involvingtwo hospitals that serve the samenumber of patients: one employs100 physicians, and the other120 physicians. The leadership of the second hospital might claimthat the additional employment is benefiting the local economy.But unless the employment of 20 extra physicians in the secondhospital generates additionalhealth improvements that arecommensurate with the addition-al spending on physicians’ sala-ries, the higher employment isnot socially beneficial. Salaries forhealth care jobs are not manu-factured out of thin air — they are produced by someone payinghigher taxes, a patient payingmore for health care, or an em-ployee taking home lower wagesbecause higher health insurancepremiums are deducted from hisor her paycheck. Additional healthcare jobs leave Americans withless money to devote to groceries,college tuition, and mortgage pay-ments, and the U.S. government 
The Health Care Jobs Fallacy
Katherine Baicker, Ph.D., and Amitabh Chandra, Ph.D.
he United States is in the throes of the most serious recession in postwar history. Despiteimproving employment numbers, the official un-employment rate still exceeded 8% in June 2012.
1204891 nejm.org
 with less money to perform allother governmental functions — including paying teachers, scien-tists, and social workers. That trade-off can be justified if it goes along with improved healthoutcomes, but not if those jobsdo not generate benefits that ex-ceed those of alternative uses.(Of course, local politicians may still prefer the larger hospital tobe in their district, as long as thepeople paying for it are not — but this is not a strategy that serves the greater good.) Thechallenge is that it’s easy to count  jobs but much, much harder tofigure out who paid for them and whether those resources couldhave been put to better use.The way we view rising em-ployment in the health sectorshould therefore be governed by the health produced by those peo-ple and resources. Panel A of thefigure illustrates the growingshare of the workforce employedin the health care field.
If we were confident that resources were flowing into health caresolely because they were drivinginnovation, raising quality, andimproving health and longevity,that would indeed be cause forcelebration. There is, however,mounting evidence that our healthcare system could deliver bettercare without spending more andthat there are tremendous oppor-tunities for improvements in pro-ductivity — which suggests that the increase in resources devotedto health care has not generatedcommensurate value.The graph in Panel B showsthat the cost per year to producea 1-year increase in life expec-tancy has risen dramatically overtime,
far exceeding conven-tional cost-effectiveness thresh-olds of $100,000 per life-year — findings that suggest that thoseresources could do more good if put to alternative uses. Althoughthe specific numbers depend onthe share of health gains attri-buted to health care spending it-self,
there is ample evidencethat incremental health carespending is producing, at best,small gains in health, and thesehigh prices for small gains areseen both for interventions at thestart of life and for those afterage 65.
This misallocation isdriven by features of our current health care system that interfere with getting the most health foreach dollar spent — such as thefee-for-service payment structure,the lack of incentives for patientsto select and providers to recom-mend more conservative careoptions, and the tax preference
The Health Care Jobs Fallacy
     P    r    o    p    o    r     t     i    o    n    o     f     H    e    a     l     t     h     S    e    c     t    o    r     E    m    p     l    o    y    e    e    s
   1   9   6   5   1   9   6   7   1   9   6   9   1   9   7   1   1   9   7   3   1   9   7   5   1   9   7   7   1   9   7   9   1   9   8   1   1   9   8   3   1   9   8   5   1   9   8   7   1   9   8   9   1   9   9   1   1   9   9   3   1   9   9   5   1   9   9   7   1   9   9   9   2   0   0   1   2   0   0   3   2   0   0   5   2   0   0   7   2   0   0   9   2   0   1   1
     C    o    s     t    p    e    r     Y    r     G    a     i    n    e     d     i    n     L     i     f    e     E    x    p    e    c     t    a    n    c    y     (     $     )
19651975 19751985 19851995 19952005
Health Care Employment and Productivity.
Panel A shows the proportion of employees in the health sector relative to the totalnon-farming civilian workforce. Data are from the Bureau of Labor Statistics (BLS)(2012). Data for years before 1990 represent “health services employment” plus“medical services employment”; data for 1990 through 2011 (after the change in theBLS employment classification system) are for “health care employment.” Panel B showsthe cost per year gained in life expectancy. Data were calculated in constant 2006 dol-lars with the use of the gross domestic product (GDP) deflator on the basis of Garberand Skinner (1960–1970, $186,308; 1970–1980, $71,767; 1980–1990, $178,000; 1990–2000, $276,535)
and Cutler et al. (1985–1995, $213,012; 1995–2005, $273,642).
Val-ues represent cost per year of life expectancy gained at age 45, under the assumptionthat 50% of the gain is attributable to health care.
If 75% of the gain were attributableto health care, each bar would be one third lower (and still well over $100,000 by 1985).

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