As it is presidential election season, we have heard, and will continue to hear, lots of discussion on the American economy and the status of employment. Policy-makers and politicians love to be able to show how many jobs they have created. These same politicians want to decrease health care costs, or at least have us think that they try hard to do so. But the main reason that governmental officials haven’t contributed to decreasing health costs in the United States, aside from worsening political polarization, is embodied in the most recent government jobs report—the health care sector creates more jobs than any other industry.
From 2005 to the second quarter of 2016, over 5 million new jobs were created in health care, including 550,000 from 2008 to 2010 during the peak of the recession’s job loss. By contrast, all industries in the US created just over 8 million jobs over a similar time frame. Between 2014 and 2024, one-fourth of all new jobs are projected to be in the health sector. But with so many efforts to lower health costs, and many health care entities crying poor, how are so many of these jobs being created?
One such area of this particular growth is among administrators in health care organizations. Going all the way back to 1970 and continuing until 2010, the growth of health care administrators has outpaced the growth of clinicians by over 3000% (see graph below), even during a time when we face a shortage of physicians in all areas of medicine, especially primary care. With third-party payers, including both private insurers and governmental programs, continually making it more and more difficult to get diagnostic tests, procedures, and various treatments covered (such as through prior authorizations and other methods), an increased number of administrative staff is needed to provide those barriers among payers. More staff is thus needed to navigate these impediments for clinical entities to receive payment. The passage of the Affordable Care Act (ACA, or Obamacare) has not done anything to stem this need for more organizational administration, and has possibly even worsened it.
While in an ideal economic environment, different hospital systems in a given geographical area would each concentrate on dissimilar medical specialties, diagnostics, and treatments in addition to their primary care base, clinical organizations by contrast compete against each other for the same patients with the same conditions by offering essentially the same services; every hospital wants to offer everything to draw in everyone’s business. More clinicians and support staff are essential to meet this goal. This resultant labor redundancy directly correlates with increased health spending as half of all health care expenditures goes toward labor. Each one of us, as well as all employers that provide health coverage, end up paying more for health care…which then leads to more hiring by health care firms to expand revenue-building opportunities. We have begun seeing this with the implementation of the ACA as hospitals have been making more money due to fewer uninsured patients, and an increase in use of services for the newly insured.
Many have pointed out how precarious our situation is in regards to growing health care costs. In the not-too-distant future, 1/5th of all money spent in the United States will be for health care, with up to 30% of that being deemed wasteful, or of no apparent value. Many efforts to root out this waste have met stiff resistance from multiple interests within health care who stand to lose significant amounts of money, and thus threaten layoffs.
But the cost of inertia is more than just increased spending on health care. It also represents the opportunity cost of less investment and job creation in other industries, further hampering broad economic growth. Fewer resources are then available for other societal benefits, such as education and public health. Health care job growth today means a net loss of economic security in the future. If only our politicians understood this!
If health care costs are actually to be decreased, it would save us a lot of money. But it would also cost many of us our jobs. Considering that the current trajectory of cost and job creation in health care is unsustainable, which direction is more palatable?