Healthcare and the economy are two of the major issues in this year’s presidential election. Voters across the country are wondering what impact the Patient Protection and Affordable Care Act will have on the recovering economy, particularly employment.
According to a report from The Urban Institute Health Policy Center, a close examination of healthcare reform in Massachusetts may serve as a case study for how national reform will impact jobs if it is fully implemented in 2014.
The study posits that healthcare reform will have little effect on employment. It cites data reflecting overall GDP growth in Massachusetts as well as private-sector employment rates that were better relative to the rest of the country from when reform was enacted in 2006, through the recession to 2010.
Some economists have previously argued that requiring employers to provide health insurance would inhibit hiring and lead to salary reductions and reduction of other benefits. But will healthcare reform result in ‘killing jobs’?
The report says its findings are a confirmation of estimates by the Congressional Budget Office. A CBO 2010 report predicted job losses under the ACA to total less than half of one percent, mostly represented by workers choosing to retire early or work fewer hours.
“Both economic theory and the actual experience under reform in Massachusetts suggest that the ACA will have little impact on employment,” reads the report from The Urban Institute. Originally published in June 2012, this month’s update summarizes some of the economic thinking, but also analyzes the rate that employers offer insurance coverage and how that has changed since reform.
Before healthcare reform, Massachusetts’ GDP grew at a slower rate than the rest of the country, according to the report. Then, after a year and a half of health reform, the recession began. From 2006 to 2008, while the nation’s economy was roiling, Massachusetts’ GDP continued to increase by 2.4 percent relative to the rest of the nation’s 1.1 percent.
Lisa Dubay, a senior fellow at the Urban Institute and one of the study’s authors, says that Massachusetts’ stability during the recession cannot be fully attributed to healthcare reform, but it is clear that the state was not hurt by it.
“Economic growth happens for a lot of different reasons. You can’t say [Massachusetts’ growth] is definitely healthcare reform, but it’s very likely a part of it,” says Dubay. “What we can definitely say about our results is that health reform didn’t slow economic growth, because in Massachusetts it was actually faster than the rest of the nation.”
What if another state had implemented health reform in 2006? I turned to Ohio, which is starting to implement elements of the PPACA, while awaiting results of the election. A 2008 report from the Ohio Department of Jobs and Family Services said the state’s healthcare industry was “largely resilient to the economic cycles that affect the rest of Ohio and the United States.”
If healthcare reform survives until 2014, what does this mean for Ohio, where unemployment is at 7% according to the latest jobs report, compared to 7.8% nationally?
Looming cuts to Medicare reimbursements promise to impact provider budgets, and layoffs might appear to be inevitable in the Buckeye state. But With PPACA-related quality measures to implement, hospitals and health systems can’t exactly remove hands from the bedside if they expect to improve the quality of patient care.
But with labor costs consuming at least half of most hospitals and health systems’ budgets, it certainly attracts the attention of CFOs such as Mary Ann Freas at Southwest General Health Center in Middlebury, OH.
Southwest General’s strategies center around labor cost efficiency, says Freas. She points out that the Urban Institute report does not pay enough attention to dual roles of hospitals and health systems—as providers and employers—in the discussion around healthcare reform and jobs.
Freas is looking down the road at healthcare reform with some trepidation.
“Our ability to throw off the kinds of margins we need to reinvest are going to be significantly impacted [by healthcare reform],” she says. All of their financial models, including costs around labor, are planning for the levels of reimbursements to decline.
“The ‘offset’ of the Medicaid expansion doesn’t cover the direct cost of providing care,” says Freas. With labor being half of the cost structure, she argues, you have to examine it.
For Southwest General, layoffs are a last resort. It evaluates hires with a focus on specialized labor pools that can deliver a high quality of care. It also measure current employees against national benchmarks and targets to operate at a LEAN staffing model.
Hospitals and health systems like Southwest General aren’t expecting to ‘kill’ jobs, but they are uncertain about the future. The twitchy and reactive hospital shares market reflects that.
And although healthcare’s job creation rates are still ahead of the rest of the economy, its plateau over the past few months seems to reflect hesitancy about what’s coming in November.
“Right now we are trying to guess at what the impact will be,” says Freas.
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