One of the most consequential unknowns in health care is whether the slow growth in spending over recent years will pick up as the economy recovers. Data suggest that in 2014 growth in health-care spendingaccelerated,rising 5% compared with 3.6% growth in 2013.
The largest cost driver in health care is labor, which representsthree-quarters of ambulatoryand two-thirds of in-patient costs. Patterns in health-care employment and wages may offer insight into future patterns in health-care spending.
Growth in health-care jobs has been constant over the past 25 years: from about 8.2 million in 1990 to 14.8 million in 2014. Even the Great Recession did not stop growth in health-care employment. In the 21stcentury, health care has created about as many jobs as the entire non-health-care economy. Between 1990 and 2013, health care became the dominant source of employment in 35 states. Wages have also grown faster in health care than in most other sectors of the economy in recent years.
But the health-care sector cannot continue to add well-paying jobs without eventually passing on those costs. Its something of a mystery to economists why this hasnt occurred in recent years. One possibility is that other, non-labor expenses decreased dramatically, partially buffering the impact of rising labor costs. This has occurred with spending on pharmaceuticals, which has fallen in recent years. But drugs account for only about 10% of total U.S. health spending and are not enough on their own to explain the magnitude of the overall spending slowdown. In addition, drug costs are rising again because of powerful, and expensive, specialty pharmaceuticals: They were up13.1% in 2014. With both labor and pharma costs rising, national health expenditures are likely to rise as well.
Growth in health-care employment has helped to ease the pain of the Great Recession. Eventually, however, something has to give, and that is likely be the pocketbooks of those who pay for care.
David Blumenthal, who was the national coordinator for health information technology from 2009 to 2011, is president of the Commonwealth Fund, a private foundation that researches health and social policy issues. He is on Twitter: @DavidBlumenthal. David Squires is senior researcher to the president at the Commonwealth Fund.
ALSO IN THINK TANK:
After 5 Years, Public Opinion on Obamacare Remains Divided
The Politics of Paying for the Medicare Doc Fix
Health-Care Deductibles Climbing Out of Reach
Link:
Health-Care Job Growth Has Been Bright. Heres the Cloud.
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