Curbing healthcare costs may come at the expense of job growth throughout the sector, according to a pair of economists.
Jonathan Skinner, Ph.D., of the Department of Economics at the Dartmouth School of Medicine, and Amitabh Chandra, Ph.D., of the Kennedy School of Government at Harvard University demonstrated a strong correlation between employment and spending in the healthcare sector and warned that cost control will eventually come at the expense of job growth.
In their op-ed article published in JAMA, Skinner and Chandra pointed out that rising employment among healthcare organizations is closely tied to cost growth. Often, the nonprofit status of many systems means there are fewer places to divert excess profits outside of service expansion. Additionally, the technological advances seen in medicine, such as the introduction of electronic health records, have increased the demand for additional employees, the authors said.
As an industry, healthcare has been a strong, consistent driver of job growth, often representing the largest gains in monthly job reports.
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The JAMA article cited figures showing a 2.1% annual increase in healthcare jobs in the United States between 2013 and 2017, during which time healthcare costs rose to 18% of GDP. The industry has become so hungry for employees that some organizations are struggling to find qualified candidates to fill their vacant positions.
While healthcare hiring has fueled job growth in the national economy recently, the accompanying rise in the cost of care has mitigated its positive effects overall.
“The challenge of job gains in the healthcare sector is higher healthcare costs, job loss in other sectors … and stagnant take-home pay for those who manage to keep their jobs,” the authors wrote.
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Because of this link, the country’s focus on controlling the cost of healthcare will eventually require slower job growth across the industry, said Skinner and Chandra. They warned human resources departments to begin to prepare for that inevitability now, since reflexive actions such as hiring freezes or salary reductions are unlikely to lower costs sufficiently. Instead, the authors recommended facilities show restraint in their current hiring and seek out better efficiency.
“The urge to expand employment using unexpectedly healthy profit margins should be resisted because it is easier to create new positions than it is to lay off workers in a less sanguine future,” the authors said.