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Health Reform and the Labor Market

By Matthew Yglesias  

"Health Reform and the Labor Market"

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The most obvious way that health care reform impacts people is by helping sick people get treatment. That said, most studies indicate that the impact of health care services on health outcomes is actually a lot smaller than people are inclined to believe. The health care system is, however, a major chunk of the economy. And making it operate more efficiently should thus have noteworthy macroeconomic impacts. David Cutler from the Harvard economics department, and a CAP senior fellow, has a paper for us that combines some recent research to try to discern what the impact of reform would be on the labor market:

This paper will demonstrate the potential impact of health care reform on employment growth in the new decade, examining two recent studies and then combing their estimates of potential employment growth. The first study, by health economists Neeraj Sood at the Leonard D. Schaeffer Center for Health Policy and Economics and School of Pharmacy at the University of Southern California, and Arkadipta Ghosh and José Escarce at Mathematica and University of California Los Angeles, shows the significant negative impact of rising health care costs on employment as firms struggle with health costs that they cannot pass along fully to workers or consumers. The second study, by health economists David Cutler of Harvard University and Karen Davis and Kristof Stremikis of the Commonwealth Fund, estimates that health care reform will slow the growth of healthcare costs and health insurance premiums.

In the analysis that follows, we combine these two studies to show that health care reform could increase the number of jobs in the United States by about 250,000 to 400,000 per year over the coming decade.

To be fair, this impact is not super-gigantic. And you could say much the same about reform’s deficit-reduction potential. It’s not something you should sneer at, but it’s not earth-shattering. And this is the way it goes with a very good, but fundamentally moderate bill. On all major fronts—growth and jobs, access, delivery system reform, cost control, deficit reduction, access expansion—it moves the ball forward. If you look at any one of these fronts, and compare what the bill does to what it should be possible in theory to achieve, it can look a bit disappointing. But the politics are inherently challenging, and you really need to see the whole landscape to recognize how impressive it is to make progress on all these different aspects of the issue.

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