‘The Golden Goose Fallacy’: Fear Of Killing Health Care Jobs

golden goose

(Wikimedia Commons)

 

Actually, the title of the “Perspective” piece just out in the New England Journal of Medicine doesn’t mention any golden geese. It’s “The Health Care Jobs Fallacy.”

But in the debate around pending Massachusetts proposals for cutting health costs, “the golden goose” — as in, the goose that lays the golden eggs and must therefore not be killed —  is coming to be code for: “We must not hurt our state’s biggest industry, which provides something like 1 in every 8 jobs, many of them good ones. Our robust health care sector continues to do well despite the tepid recovery in other sectors. We must cut costs but without costing jobs.”

Responding to that sentiment, the Perspective’s authors, Katherine Baicker and Amitabh Chandra, both Harvard professors, conclude their piece resoundingly with this: “Treating the health care system like a (wildly inefficient) jobs program conflicts directly with the goal of ensuring that all Americans have access to care at an affordable price.” They argue that health care jobs “should be neither a policy goal nor a metric of success. The key policy goals should be to achieve better health outcomes and increase overall economic productivity, so that we can all live healthier and wealthier lives.”

Goose for dinner, anyone? WBUR’s Martha Bebinger spoke today with Professor Chandra, of the Harvard Kennedy School of Government. Their conversation, lightly edited:

There is a controversy in Massachusetts right now about how to cut health care costs without compromising the quality of the health care. Do you see yourself as taking on this issue right now?

No, I don’t. We were motivated much more by the national debate, in particular the fact that in Washington we seem to be drawn to evaluating health care policy by whether or not it’s job-creating or job-killing. You may have heard Speaker Boehner refer to Obamacare as ‘the job killing act,’ and the president is quick to respond that it will create jobs. Our view is that this is all a total distraction. We shouldn’t expect the health care system to both deliver health care, keep it affordable and at the same time create jobs because that’s not something that it can do.

‘For every job in health care, the salary is not created out of thin air. Some Massachusetts resident paid for that job in the form of lower wages, or higher taxes.’ – Prof. Amitabh Chandra

Let me give you an analogy with the car industry. We really can’t ask Toyota to sell Camrys for $30,000 and create jobs. The Camry will cost $50,000 dollars. If we care about employment in the United States, as we should, we should think about employment policy directly, perhaps by expanding unemployment insurance benefits or creating a job creating program. It’s really difficult to give the health care industry two conflicting charges: That you need to give health care at low cost and be responsible for employment growth.

The health care system should be viewed by one criteria, and one criteria alone: How much health care does it deliver for the amount of money that’s going into it? All these jobs aren’t creating high-value health care. In other industries, when you see job growth, we think, ‘Oh this is wonderful.’ We don’t in health care because we have a lot of evidence that our health care system could be doing a lot more for a lot less.

Well, part of why that’s true is because we have hospitals in every politician’s district and we don’t have Toyota factories in every district.

Right, and I think that’s a smarter solution. The fact that we have hospitals in every politician’s district is wonderful, that’s good for the citizens of that district. But we should be asking what those hospitals are really doing, as opposed to what jobs are being created at those hospitals. And the reason is that for every job in health care, the salary is not created out of thin air. Some Massachusetts resident paid for that job in the form of lower wages, or higher taxes. So someone got less to spend on education or mortgage or rent or groceries because of that health care job.

Health care jobs are 11% of total employment, but it means that the other 89% of people with jobs are paying for that health care job in the form of lower wages, or taxpayers are paying higher taxes because the government is the biggest purchaser of health care. It just seems like that is a wildly inefficient system.

Is there any way to make a balanced assessment about the health care jobs issue in relation to cutting costs? How much does it hurt versus helps us?

Both sides are right. There’s this obsession with viewing health care jobs as good jobs, jobs that must be preserved for a bright spot in the otherwise bleak employment picture. It’s fundamentally misleading because it misses the fact that other people paid for those health care jobs or that other employers left Massachusetts, which is very costly for the state. There are employers that will leave the state, there are manufacturers that will not have a manufacturing facility in Massachusetts because of the high cost of health care here.

‘It is so easy to count jobs, and so much harder to count the foregone lower wages and higher taxes that people are paying for those jobs.’

 

What’s your advice for politicians who get lobbied by people worried about reducing health care spending?

I would say you’ve got to do the full arithmetic. There’s no question that the person losing their health care job is harmed by losing their job. I don’t dispute that for one second. But we must remember the vast majority of other people in your district who paid for that health care job in the form of lower wages.

Massachusetts residents have lower take-home salaries because of their higher health care premiums, and those lower salaries are something everyone in that district is grappling with to create that one extra job in health care. You might ask, ‘Why is this so prevalent? Why does this happen?’ It happens because it is so easy to count jobs, and so much harder to count the foregone lower wages and higher taxes that people are paying for those jobs. I think if most politicians open their eyes to this uncomfortable arithmetic, they’ll quickly realize that it’s not in the best economic interest of their district to push for health care jobs.

Listen to All Things Considered today (Thursday) to hear Sacha Pfeiffer’s conversation with Katherine Baicker. (Update: Here’s that conversation.) Hat-tip to Katie Broida for transcription.

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  • Paul Levy

    Bravo!