Payment Reform – The Impact On Jobs & The Economy

What will the impact of lowering health care cost growth be on jobs?

The health care provider industry is warning about the possible loss of jobs in the health care provider industry. This is apparently striking a chord among some policymakers, who worry about killing the goose that lays the golden eggs. Health care is a growth industry in the Bay State.

There’s no question that reduced health spending will impact providers. Keeping people healthier, and re-orienting the delivery system towards prevention and wellness may reduce the need for acute care and some specialists. It also might increase employment for professions like community health workers, nurse educators, and nutritionists. We don’t know what will be the net impact on health care jobs.

But for the overall economy, reducing the cost of medical care will be a huge plus. Today’s report by the Blue Cross Foundation, Benefits of Slower Health Care Cost Growth for Employees and Employers was authored by Jon Gruber and based on his econometric modelling. Here’s the conclusion:

Rapidly escalating health insurance costs are a genuine threat to Massachusetts businesses and workers. Although rising health care spending may be a boon to the health care sector, it causes substantial harm to both employers and workers in the state as a whole. As this analysis shows, even under relatively conservative assumptions regarding the future growth in health insurance premiums, the harm to employers and workers is clear: employer spending on ESI will skyrocket, wages will suffer, unemployment will increase, and business profitability will decline.

Even modest reductions in health care spending growth would have dramatic positive effects on employers and workers. State and local governments, too, would benefit substantially from lower health insurance premium growth. Expenditures on their largest and fastest growing budget items would increase more slowly, and higher wages, employment, and corporate profits would generate more tax revenue.

Much is at stake in the current debate over health care costs. While designing and implementing policies to control increases in health insurance premiums and medical spending will not be easy, the resulting improvements in the state’s labor market and in the health and vibrancy of the state’s economy are well worth the struggle. Without strong action, health insurance coverage will erode, workers’ wages will stagnate, and employers will have fewer resources to invest in growing and strengthening the Massachusetts workforce and economy for the opportunities and challenges of the 21st century.

We understand the the legislative bills will include substantial provisions on workforce development and retraining. This research also provides strong justification for proposals like the Public Health Trust, which would invest in cost-saving community prevention. The insurers and employers contributing to the fund would reap the benefits of lower health costs.

This report should encourage employers to redouble their push for aggressive steps to lower costs by improving care.
-Brian Rosman

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