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Republicans have it backwards on the jobs effect of health-care reform

The new House leadership in Washington knows what issue best moves voters in today's beaten, beleaguered economy: jobs. Long-simmering angst over employment and economic recovery delivered Republicans a huge electoral victory in November, here in Minnesota and throughout the country. So in the debate over their first major legislative proposal — repealing the Patient Protection and Affordable Care Act — Republicans are highlighting at every opportunity the effect on jobs they say "Obamacare" will have. Indeed, they christened their bill to undo health-care reform the "Repealing the Job-Killing Healthcare Law Act" (though over the weekend, Majority Leader John Boehner toned the rhetoric down to "job-destroying" and "job-crushing").

But will the health-care reform law signed by President Barack Obama last March lead to job losses? There's a lot riding on the answer to this straightforward question, in a time of persistent unemployment and widespread economic pain. Given how vast the new law is, and how much latitude it gives states to shape implementation, arriving at an answer to the question would seem to be far from straightforward. But in fact the best research offers an unambiguous answer: Health-care reform will deliver a large boost to U.S. employment in this time of economic crisis.

How can we know the reform's effect on employment (that is, of course, assuming its opponents fail in their efforts to strip it of key provisions or repeal it outright)? Adding up the expected effect on jobs from each one of its many provisions, and figuring out how to account for the uncertainty regarding future implementation decisions that will shape the effects of some of those provisions, would be a daunting analytical task. However, a groundbreaking research paper published in 2009 by a team of economists from the RAND Corporation provides a set of tools that allows us to answer this difficult question with some confidence.

What their research shows, in brief, is that any decline in the growth rate of health care costs — even a very small one — will generate significant job growth.

Health care's drag on economic growth
The pace of growth of health-care costs, relative to the prices of all other goods and services, has been universally decried by economists for years as a drag on our economy. As the number of dollars spent in the health-care sector has mushroomed — if recent trends continue, health care will account for one-fifth of our entire Gross Domestic Product within the decade — this drag on economic growth has likewise increased.

The ingenious contribution made by the RAND researchers was to establish the different effects this ballooning of health-care costs has on different industries. The drag on employment is most severe in industries where a larger percentage of workers are covered by employer-sponsored insurance.

The RAND researchers' findings enable us to estimate the number of new jobs that would be created, by industry, as a result of any given percentage of decline in the rate of increase of health-care costs.

First major effort to rein in health-care costs in decades
The Patient Protection and Affordable Care Act includes numerous measures to reduce inefficiencies in our health-care system, thereby reining in the rate of cost growth. Could it have done more to rein in health-care costs? Absolutely. Is there room for it to do more, if key implementation decisions over the next couple of years are made based on a firm commitment to this goal? Yes. But none of that changes the fact that the reform law as it now stands is the first major contribution to reining in health-care costs in decades. Some of its most important measures to rein in health-care costs are:

• Incentives for use of preventive and primary care;

• Support for demonstration projects exploring different models for rewarding quality of care not the volume of services provided (together with mechanisms to speed replication of the most successful of these payment-reform projects nationally);

• Incentives for better coordination of care; and

• Systematic research on the effectiveness of different treatment options for the chronic medical conditions that account for the lion's share of all health-care spending.

USC economist Neeraj Sood (one of the RAND study's authors) and Harvard economist David Cutler used a conservative estimate of the total effect of these measures — a reduction in the growth rate of national health expenditures from 6.4 percent to 6.0 percent — to predict health-care reform's effect on employment over 10 years. Such a small drop in the rate of growth of health-care costs would, they found, create 2.5 to 4 million new jobs. For Minnesota, this would mean between 35,000 and 60,000 additional jobs by 2019.

A bigger hypocrisy
Much has been made already of the Republicans' hypocrisy in claiming to champion fiscal responsibility at the same time they push for repeal of health-care reform. Repeal would — according to the nonpartisan Congressional Budget Office — add $230 million to the annual deficit over the next decade. But in the current economic climate, hypocrisy on the federal budget is very small potatoes, politically, compared to hypocrisy on saving jobs.

In the jobs crisis we're facing, any actually "job-killing" policy not only is, but also ought to be, politically anathema. But is health-care reform a job-killer?   

Just in case sober economic analysis still matters to a few people out there, in the face of all the spin and message discipline: the "Repealing the Job-Killing Healthcare Law Act" would eliminate an average of 250,000 to 400,000 jobs each year this decade. At least. Does that sound like a good idea to you?  

Phillip Cryan is the organizing director of SEIU Healthcare Minnesota, a 16,000-member health-care workers' union. He holds a Master's degree in public policy from the Goldman School at the University of California, Berkeley. In 2009 the Economic Policy Institute published his report estimating the employment effects of a "play or pay" employer mandate for health care.

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Comments (3)

you're wrong, wrong, wrong...the republicans are right, right, right! obviously you've never owned a business that provided jobs for the father in law will lay off hundreds as soon as obamacare goes into effect. my husband has already laid off half his staff-in times of poor economy you can not force people to buy anything! it's against the constitution in the first place.

Healthcare workers will leave the field when their healthcare benefits are normalized to the government issue level from the "Cadillac" level attracting them to the field, many in positions functioning below their potential for the attractive benefit.

Bad timing as that adjustment will come just as 30 million will be filling the delivery conduit at the same time.

Thanks Philip, for telling it like it is. I doubt if any of these people whining about 'Obamacare' have read the bill, or would understand it if they did. It's not a job killer, but it illustrates the old notion that you can fool all of the people, like Debi, some of the time.