Jobs, Jobs, Jobs and Health Care

Given that it’s election season (again), the twin topics of jobs and health care will be upon us ad nauseum.  Employmnet in health care fields has grown rapidly since the passage of Medicare in 1965 (see the chart in the article cited below.)  Is this a good thing?  If the health care industry is terrific at creating jobs, why don’t we just spend continuously more on health care (as we in the U.S. have done steadily for at least the past 60 years)?

In the current issue of that most famous of medical journals, The New England Journal of Medicine, Katherine Baicker and Amitabh Chandra explain why such a policy is a terrible way to increase the economic welfare of Americans.  The argument is pretty straight forward for any student of economics, though not necessarily for the political cognoscenti.

But this focus on health care jobs is misguided. The goal of improving health and economic well-being does not go hand in hand with rising employment in health care. It is tempting to think that rising health care employment is a boon, but if the same outcomes can be achieved with lower employment and fewer resources, that leaves extra money to devote to other important public and private priorities such as education, infrastructure, food, shelter, and retirement savings.

They provide two graphs to illustrate the strong correlation between employment growth and cost per year of life expectancy gained (not easily transported to this blogpost).  Now, clearly, correlation does not imply causation, and there certainly are health outcomes of interest in addition to life expectancy, but careful studies of such relationships suggest strong diminishing returns to devoting a larger and larger share of our workforce to health care services.

Keynes argued that we could increase employment and spending by hiring one group of people to dig holes in the ground and another to fill the holes back up.  Although this might increase expenditures and employment in the short run, without productivity increases to generate income, such workers would have to be paid out of existing production, and thus, such income generation would not yield sustainable improvements.  Baicker and Chandra make a similar point.

The bottom line is that employment in the health care sector should be neither a policy goal nor a metric of success. The key policy goals should be to achieve better health outcomes and increase overall economic productivity, so that we can all live healthier and wealthier lives. Our ability to ensure access to expensive but beneficial treatment is hampered whenever health care policy is evaluated on the basis of jobs. Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.

So what does this have to do with yesterday’s Supreme Court ruling?  Who knows?  It all depends upon how the legislation is implemented and how people respond to incentives provided.