For the first time in U.S. history, health care is the country’s largest employer. Five of the 10 fastest-growing occupations over the next decade are in health care, and projections say the sector will soon create one-third of all new jobs. While this progress has been a celebration for many, unchecked job growth in health care has also been the primary driver of America’s skyrocketing health care prices, and hasn’t translated into better outcomes for patients.
Capitol Hill policymakers, who could help remedy the situation, are more likely to tout the growth in health care jobs in their home states as an economic win than to ask the hard question of whether these jobs are good for the nation’s health.
Even as retail and manufacturing positions were lost to globalization and automation, health care jobs remained resilient. Enrollment for Medicare and Medicaid increases during recessions, so federal health care programs like these don’t just bolster the safety net, they keep health care jobs robust even in economic downturns — the number of health care jobs rose every month during the Great Recession.
The cost of labor makes up more than half of the total cost of delivering health care. So as health care employment rises, it pulls up health care prices. Expenses are passed down to employers and patients in health insurance premiums, which are escalating at a rate outpacing inflation.
More jobs and higher prices haven’t translated to better health care. The rapid growth in employment has largely come from adding administrative and management jobs, rather than from adding clinicians responsible for direct patient care. Administrative costs in U.S. health care are the highest in the developed world, accounting for more than 25 percent of spending in the sector. Yet even as U.S. health care prices surge relative to other industrialized countries, Capitol Hill policymakers tend to stay on the job-growth bandwagon.
How did we get here? Congressional apathy on hospital growth can be traced to political arm-twisting during passage of the Medicare Prescription Drug, Improvement, and Modernization Act — usually known as the Medicare Modernization Act (MMA) — in 2003 and to an obscure provision added to the bill, the Section 508 waiver. It allowed hospitals to apply for an increase in their Medicare payment rates.
The waiver was intended to boost revenue for hospitals in places where health care labor was more expensive. It also proved useful for congressional leaders aiming to persuade reluctant policymakers, especially those whose districts could benefit from health care industry growth, to vote for the bill. Researchers found that hospitals in the districts of congressional representatives who voted in favor of the MMA were five times more likely to receive a Section 508 waiver than hospitals in the districts of representatives who voted against the MMA.
Hospitals that got waivers increased hiring, payroll, executive bonuses, technology use, intensity of patient care, and political lobbying, with an overall increase in total spending of more than $100 million annually. Many hospitals are their district’s largest employer.
While these investments did not appear to have paid off in terms of improved patient outcomes, they did pay off for lawmakers. A working paper from the National Bureau of Economic Research found that, following passage of the MMA, lawmakers with a Section 508 hospital in their district received a 22 percent increase in total campaign contributions and a 65 percent increase in individual contributions from employees in their state’s health care industry. The health care industry has spent nearly $1 billion lobbying politicians over the last two years. As job growth and industry consolidation leads many hospitals to become their district’s largest employer, politicians will see less and less incentive to bend the cost curve of health care.
Despite recent proposals from policymakers and think tanks to rein in health care spending and make care delivery more efficient, the compounding effect of health care job growth and misaligned political incentives make it unlikely that any federal policy to address this will come to fruition in the near future.
Instead, actions outside of Washington, including leaner workflows for care delivery and reimbursement, along with new technologies that improve efficiency and eliminate redundant jobs, may help keep the health care sector from facing runaway spending.
Venture capitalists have been pumping substantial funds into digital health companies with each passing year. In 2017 alone, $482 million was invested in startups that aim to infuse technology into nonclinical operations, such as billing and scheduling. By automating away some of the bureaucracy in the health care system and liberating clinicians to practice at the top of their licenses, such efforts could help slow the growth of health care spending.
But that won’t be enough to unravel the link between politics and the growth of health care jobs. Ultimately, Congress needs to advocate for evidence-based policies that value productivity rather than growth, and stop thinking about health care policy as a jobs program.
Nisarg A. Patel is a fourth-year student at the Harvard School of Dental Medicine and the co-founder of Memora Health, a technology startup that automates discharge and follow-up workflows for health care organizations.
Nisarg, WOW! You nailed it. Great piece and fantastic understanding of this problem. I’m very excited for Redirect Health and Memora Health to work together.
As a retired occupational therapist that has witnessed first hand the changes in health care policy, this article raised a new perspective in the added jobs were administration rather than clinicians. What do administrators do? Push paper, billing, compliance with state and federal regulations, In my small part of the healthcare system, I would read changes Medicare regulations for occupational therapy. Strangely, none of my co workers knew nothing about them and nothing came down the chain of command to inform us. (there were a FEW exceptions) Generally, most staff were ignorant of them. The vast majority of the regulations were to contain or eliminate the over utilization of therapy services.
The fundamental cause of increasing health care costs was not mentioned in the article or anywhere else in recent literature. Decades ago, our governments decided to “privatize” our health care system.
There was a lack of health care facilities of all kinds and the government simply didn’t want to foot the bill to construct and operate them.
For profit hospitals popped up like dandelions after a spring rain.The catholic hospitals contracted out their administration and any control of their operations. There were ‘incentives’ in the legislation. Most notably private hospitals were guaranteed a 10% return per year of capital investment. I’ll buy any stock that guarantees me a 10% return every year. What a deal!
City/County run hospitals and nursing homes are a rare entity now.
So where did the money to build all this infrastructure come from Medicare, Medicaid, private insurance. Ten cents of every dollar billed went back to the stockholders.
America built and built and built and over built. Few regulation evaluating the legitimate need for another hospital being built. After all, those WW2 boomers are coming right at the health care system as they age. Sadly, they underbuilt infrastructure in rural America. Nobody applied to build one. A couple of decades ago St. Louis bragged that they had more MRI machines In St. Louis county than the entire country of Canada. To me that meant that Canada did not have enough MRI machines and St. Louis too many. Those machines were not being use constantly 24 hours a day, 7 days a week. So how did that impact my health care? Just on my bill. America has more than enough health care infrastructure. The supply needs to meet the demand. We need more in rural areas. The private sector simply has not been interested.
We can’t unbuild what we have. We can make it unprofitable for those that do not demonstrate higher that average patient outcomes and are inefficient economically. There will be a lot of buying and selling and those that are aging and uneconomical to operate will close.
All of this is fundamentally about $MONEY$. That massive increase of administrative jobs can be fixed overnight with a single payer system. Poof! One set of paperwork. One form to fill out. One set of rules and regulations. One dept to investigate and prosecute fraud.
The other benefit which is not discussed but scares the shit out of the health care infrastructure is the absolute POWER it will have to squeeze down health care reimbursement. It has happened before. Prospective payment by Reagan was the Medicare “reform” where you got so many days in the hospital. It decreased the length of stay and saved Billions of dollars. It also killed tens of thousands of American seniors and in hindsight considered a debacle. How and why, a different discussion. The only health care resources available to those patients were nursing homes and home health agencies. Nursing homes filled up. Legislation with Medicare reimbursement resulted in a business opportunity.to set up a home health agency. They could pay excessive salaries to hire nurses if needed. Charge $60 for a 1 hour high school graduate nurses aid visit that they paid $10 an hour. It was lucrative and home health agencies grew and grew and grew and grew. It was not uncommon for an agency to have a staff of less than 10. 4-5 Aids, 1-2 RN, 1 Director, 1 Billing. 1 secretary/receptionist/janitor. As the availability of services grew and modifications to Prospective Payment they ran out of patients. Many hired recruiters to ‘market’ their services to the discharge planner at the local hospital. A few kickback schemes were prosecuted. Medicare changed reimbursement criteria for the ‘medical necessity’ for aid visits. They squeezed many home health agencies out of business by changing the rules to get paid. A single payor system can squeeze hospitals and doctors that order every test under the sun and ask for a consults by 3-4 other doctors he plays golf with. Why pay for it if there was no justifiable medical reason for it. Why an MRI when an x ray will show a fracture.
When I retired as an occupational therapist was right after I realized I was more like a lawyer than a therapist. Sometimes my client is better off and sometimes not. My boss never asked about patient outcomes.
Who went home. Who went to a nursing home. I frequently hear them talk about not meeting their “productivity standards” AKA not padding the patient’s bill with extra charges for services not rendered aka fraud. At the end of the day all my employers wanted to know was my billable hours to Medicare.