Why isn’t health care employment slowing?

by on July 15, 2013 at 6:44 am in Law, Medicine, Uncategorized | Permalink

We’ve all heard a lot about the slowing of health care cost inflation.  Yet, coming from Dan Diamond of The Advisory Board, here are some very interesting points of relevance to the topic:

“A lot of people have noted that health care spending has slowed,” Amitabh Chandra, an economist and the director of health policy research at the Harvard Kennedy School, told me last week.

“Many of us would like to think that this is a more permanent slowdown,” he added.

“[But] we see absolutely no slowdown in employment growth in health care. And if that is not slowing, then it’s very difficult to believe that there will be a sustained slowdown in health care spending.”

Health care gained more than 320,000 jobs in 2012—the sector’s strongest year in five years.

…”One hypothesis is that only lower-paying jobs in health are growing,” the Altarum Institute’s Ani Turner told me via email. But “we don’t think that’s true.” Altarum researchers have reviewed BLS data and found “stable growth” for the most highly paid health care workers—i.e., doctors and nurses—if somewhat lower growth for health care support roles.

And the University of Texas’s Richardson took a look at two other potential culprits: whether the wages paid to health care workers had fallen in recent years, or if their hours worked had declined. But neither scenario had come to pass; in fact, Richardson found that hourly wages had only climbed, while weekly hours worked have remained essentially flat.

The full article is here, and the entire discussion is of interest.  You will note for instance that capital spending does seem to be down.

File under “The Puzzle Deepens.”

Sam July 15, 2013 at 7:05 am

In Canada there are two recent periods of slow expenditure growth: this recession and the early ’90s recession. Perhaps health care staff aren’t very cyclical whereas big ticket items, like hospital expansion or new equipment, are. Slower capital spending is consistent with that.

RC July 15, 2013 at 8:10 am

It’s simple, really. ICD-10, Meaningful Use, the de facto requirement to form “clinically integrated” networks, ACOs, etc. It’s much like the early aughts, when Sarbanes-Oxley had millions of corporate busybodies and consultants doing high-wage/low-value work to meet regulatory changes. Only multiply that by three or four for the current healthcare industry.

Hazel Meade July 15, 2013 at 9:01 am

Easy answer. Health providors are anticipating a massive increase in demand when the PPACA comes into full effect, and are staffing up in response.

Fake Fake July 15, 2013 at 9:16 am

Increased supply (of workers) leads to lower prices.

James Oswald July 15, 2013 at 9:20 am

Easy answer: demand is increasing.

Yancey Ward July 15, 2013 at 10:36 am

Easier answer- those telling you that costs have flattened are lying.

Claude Emer July 15, 2013 at 10:48 am

I’m not clear on why declining costs should imply lower employment. Cost = wages? Even with lower wages, I don’t see employment declining. Are people not expected to get sick anymore? Shouldn’t lower cost mean lower prices thus more customers/patients thus more employees?

Also, did people drop out of med school 5 years ago because of Obamacare?

JWatts July 15, 2013 at 5:36 pm

I’m not clear on why declining costs should imply lower employment. Cost = wages?

The article says that wages aren’t declining either. And since the biggest component of costs is wages, that would imply that the current slower rate of inflation in medical care costs is temporary.

If it’s just a case of slower capital spending, then the lower inflation is temporary.

Boonton July 16, 2013 at 10:34 am

Inflation means higher and higher prices for the same basket of goods. Healthcare, though, does not make a good basket and where you can make one you find no inflation.

For example, aspirin has been around for a century. Compared to, say 1970 or so there’s been little or no inflation in aspirin. Viagra is expensive compared to aspirin but you can’t really talk about inflation because it didn’t exist in 1970.

So I do not have the ability to opt to visit a doctor whose knowledge extends only to 1989. If you tell me a doc. appt has increased 20% since then how much of that is paying for the same old visit (inflation) versus the newer knowledge & products a doctor circa 2013 is expected to have (a new product)?

Anyway, you can have increased wages and employment combined with a flattening of prices if you have increased productivity. If you can get more patient visits done per hour the office can hire more staff and even pay higher wages too while keeping price increases flat.

Michael D. Abramoff July 16, 2013 at 2:48 pm

There has been a decline, not increase, in productivity of health care workers. Specifically for physicians you can pull this data from the BLS website. Physicians are seeing fewer, not more, patients per hour than 50 years ago.

About the argument you are trying to make, consider productivity in car manufacturing. Cars are infinitely much better than 50 years ago, but a given car factory worker builds many more cars per hour in 2013 than in 1953.

Increase in product quality is not reciprocal to productivity.

Boonton July 17, 2013 at 11:20 am

The problem is producitivty on a macro scale is measured by output over input where output is what the product is sold for. If you make twice as many cars today as you did in the past, but cars cost twice as much you really expanded output by a factor of 4, not 2. To the degree that adding quality to a product allows you to sell it for a higher price then that indeed is part of productivity.

I’ll look thru the BLS site to find physician and patient visits. My impression is that they see more since when I look at doctors offices waiting rooms are packed, assistants and staff collect a huge amount of basic data and the doctor him or her self only actually speaks to you for 5-10 minutes if you’re lucky before hurrying off to the next room. It would be hard to see how you could set it up so a doctor could see any more patients in an hour at that pace. Likewise the hospital is another fiasco for ‘patient visits’. Every time we’ve had an older relative in the hospital you get a bunch of doctors who stop in a minute a day to ask ‘how’ya doing’ which we discover is a ‘patient visit’ a month or two later.

RZ0 July 15, 2013 at 10:54 am

The chart in the story shows that the rate of employment has slowed. The authors of the piece don’t seem to think a decline in annual employment growth to (eyeballing here) 1.8% from 2.9% is significant, but I’d suggest it is.
The inflection points of employment growth seem to closely mimic those of health expenditures.
A slowdown in employment growth – taking place in a worker-dense, low-productivity-growth industry such as health care – would have precisely the leveraging effect the chart shows. (If the growth in expenditures came primarily from new jobs, removing the new jobs would eliminate the growth – particularly when nationwide wages are flat or falling slightly.)

Andrew' July 15, 2013 at 1:17 pm

Even simpler, the great recalculation proceeds towards healthcare.

Spencer July 15, 2013 at 1:46 pm

My wife just had surgery and I was really surprised when talking to RN’s to find they are working a 30 hour week — both in the hospital and the rehab facility. Is this now widespread?

Is there a shift in work hours in healthcare to avoid extra expense of full time professionals?

Marie July 16, 2013 at 8:58 am

Yes. Talk to nurses, their market conditions have drastically changed over the past five years.

Lord July 15, 2013 at 4:20 pm

The presumption health care costs are labor driven may not be warranted.

Marina Diaz July 15, 2013 at 4:49 pm

They have to start saving money, I don´t understand why they don´t use oxygen generators i.e. http://cryoair.com a fraction of the cost of normal oxygen! Hope they get better services

Andrew' July 15, 2013 at 7:36 pm

Hey economists, how much GDP did we outsource?

Comments on this entry are closed.

Previous post:

Next post: