Analysis: A Health Care Overhaul Could Kill Two million Jobs, And that is OK

As requires radical health reform grow louder, many around the right, within the center and in the health care industry are arguing that proposals like “Medicare for All” would cause economic ruin, decimating a sector that is representative of nearly 20% of our economy.

While exploring a presidential run, former Starbucks chief Howard Schultz called Medicare for those “not American,” adding, “What industry shall we be likely to abolish next – the coffee industry?” He explained it would “wipe out the insurance industry.”

A fellow at the libertarian Cato Institute wrote that it would “carpet bomb the industry.” David Wichmann, the main executive of UnitedHealth Group, warned that it “would have actually a serious impact on the economy and jobs.”

It's true: Any significant reform would require major realignment of the health care sector, that is now the biggest employer in at least twelve states. Most hospitals and specialists could possibly lose money. Some, such as the middlemen who negotiate drug prices, could be eliminated. That would mean job losses within the millions.

Though it will likely be economically painful, the point is to streamline for patients a Kafka-esque healthcare system that makes money for industry through irrational practices. After all, shouldn't the primary objective of any adverse health care system be delivering efficient care in a reasonable price, not rewarding shareholders or buttressing the economy?

In 2012, Harvard economists Katherine Baicker and Amitabh Chandra warned against “treating the care system just like a (wildly inefficient) jobs program.” These were rightly worried that the health care system was the primary engine of recovery from the Great Recession. But the revelation the healthcare sector added more jobs this past year than every other in the economy was greeted by many people nearly as good news.

It's not surprising those active in the business of drugs have joined forces in a lobbying and media campaign, the Partnership for America's Healthcare Future, to ward off transformational reform, particularly Medicare for All. But fed-up voters seem ready to upend a business that saps their finances, wastes their some time and doesn't deliver particularly good care. Few people would mourn the end of $35 million annual compensation packages for insurance executives or the downsizing of companies that have raised insulin prices to 10 times what they are in Canada – though they may miss hospitals' valet parking and private rooms.

Well over half of Americans already say there is a favorable look at Medicare for those. Though approval falls off facing details such as higher taxes, it's clear the electorate is trying to find something big. Change could are available in many guises: for instance, some type of Medicare expansion, government negotiations on drug prices or improving the power the Affordable Care Act. The greater fundamental the reform, the more severe the economical effect.

The first casualties of the Medicare for All plan, said Dr. Kevin Schulman, a physician-economist at Stanford, will be the “intermediaries that add to cost, not quality.” For instance, the armies of administrators, coders, billers and claims negotiators who make good middle-class salaries and have often spent years in class learning these skills. There would be much less requirement for drug and device sales representatives who ply their trade office to office and hospital to hospital inside a single-payer system, or one by which prices are set at a national level.

Some geographic areas would be hit particularly hard. Just one hospital product is by far the largest employer in many post-manufacturing cities like Pittsburgh and Cleveland. Hospitals and hospital corporations make up the top six employers in Boston and two from the top three in Nashville. Hartford is known as the insurance coverage capital of the world. Where would Nj be if drugmakers took a big hit, or Minnesota if device makers vastly shrank their workforce? (Which may be why some Democratic representatives and senators from all of these left-leaning states have been quiet or inconsistent on Medicare expansion.)

Stanford researchers estimate that 5,000 community hospitals would lose more than $151 billion within Medicare for those plan; that will translate into the loss of 860,000 to 1.5 million jobs. A Navigant study discovered that an average midsize, nonprofit hospital system might have a net revenue loss of 22%.

Robert Pollin, an economist in the Political Economy Research Institute from the University of Massachusetts-Amherst, is frustrated not merely by the doomsday predictions but also by how advocates of Medicare for those have a tendency to read the jobs issue.

“Every proponent of Medicare for All – including myself – has to recognize that the biggest source of cost-saving is layoffs,” he explained. He's calculated that Medicare for those would lead to job losses (mostly among administrators) “somewhere in the selection of 2 million” – about half on the insurers' side and half employed in hospitals and doctors' offices to argue with the former. Supporters of Medicare for those, he explained, need to look at a “just transition” and “what it might seem like.”

Of course, if more and more people get medical health insurance under an expanded Medicare, there will be a larger requirement for some workers – like nurse practitioners and physician assistants. And there is a large unmet labor need in caring for an aging population. The second are mainly low-wage jobs, however, nor compensates for that losses.

Pollin shows that a transition to Medicare for All should be along with a plan to give those made redundant up to 3 years of salary and assist in retraining for another profession.

Despite the short-term suffering brought on by any fundamental shift in our health care delivery system, reform would ultimately redirect resources in ways that are great for the economy, many experts say.

“I'm sympathetic towards the impact that changes may have on specific markets and employment – we can measure that,” Schulman said. “What we can not quantify is the effect that top health care costs have experienced on non-health care industries.”

The expense of paying for employees' healthcare has depressed wages and entrepreneurship, he explained. He described a textile manufacturer that moved a lot more than 1,000 jobs out of the country because it couldn't manage to purchase insurance because of its workers. Such decisions have grown to be common recently.

“Yes, these are painful transitions,” said Baicker, who's the dean of the University of Chicago's Harris School of Public Policy. “But the reply is to not freeze the sectors where we're for all time. When agriculture improved and became easier, no one said everyone had to stay farmers.”