Earlier this week, Larry Levitt commented on the New York Times article on middle class jobs in healthcare with the following tweet:
Great to see more middle-class jobs. Of course, when the jobs are in health care, more employment = higher costs. http://t.co/dBIvZOSc94
— Larry Levitt (@larry_levitt) February 23, 2015
I think there are two ways to read this tweet. The first is the simplistic one that of course an additional job in healthcare, all else being equal, leads to higher total expenditure on healthcare. That is barely interesting. The more important question in health policy is at what rate does total health care expenditure change in relationship to the broader economy. If it grows faster than the broader economy, healthcare takes up more proportional resources. If it grows slower than the general economy, we have more money to spend on other things. The past couple of years, healthcare expenditures have been growing at roughly the rate of the economy which is a massive policy victory.
This relative proportional change lens makes us view employment reports differently. Right now, the US devotes roughly 17% of GDP to health care. The US civilian, non-institutional labor force in NAICS 621,2,3 for the BLS has roughly 10.5% of that labor force devoted to healthcare. That number has been reasonably stable for the past several years, and before that, it was increasing at a slower rate than the total healthcare expenditure growth rate.
Last month, the US economy added 257,000 new jobs. We would expect the US economy to add roughly 27,000 healthcare jobs based on the headline number. Last month, the initial estimate had a healthcare job gain of 38,000 new jobs. So we were devoting a little more of labor force to healthcare than job growth alone would suggest. Given the known error bars on the subset estimates, that is not too worrying of a deviation from the 2014 average of healthcare roughly growing proportionate to total job growth.
We should expect to see healthcare jobs increase as the employment rolls increase, and as the population ages. That leads to the next analytical question… what types of jobs are being added. If a disproportionate number of jobs being generated are high end specialists than it is highly likely healthcare spending will be increasing as they tend to get paid a lot plus order expensive treatments. If a disproportionate number of new jobs are licensed practical nurses who visit high risk patients, physical therapists and care cooridination specialists, they are comparatively cheap to hire and more importantly, they divert significant amounts of future spending. Seeing an increase in outpatient clinic employment and a decline in hospital employment would be a significant change in the employment case mixture that would lead to a conclusion that healthcare costs are being contained. It is quite possible for significantly more people to be employed in healthcare at medium levels of skill while total costs as a proportion of GDP stays stable.
Both the total employment levels and the mix of employment are critical components to look at.