The Healthcare Boom

THE HEALTHCARE BOOM….Business Week’s cover story in their current issue tells us that healthcare inefficiency is what’s keeping the American economy afloat:

The very real problems with the health-care system mask a simple fact: Without it the nation’s labor market would be in a deep coma. Since 2001, 1.7 million new jobs have been added in the health-care sector, which includes related industries such as pharmaceuticals and health insurance. Meanwhile, the number of private-sector jobs outside of health care is no higher than it was five years ago.

…. The U.S. unemployment rate is 4.7%, compared with 8.2% and 8.9%, respectively, in Germany and France. But the health-care systems of those two countries added very few jobs from 1997 to 2004, according to new data from the Organization for Economic Cooperation & Development, while U.S. hospitals and physician offices never stopped growing. Take away health-care hiring in the U.S., and quicker than you can say cardiac bypass, the U.S. unemployment rate would be 1 to 2 percentage points higher.

….Both sides can agree that more spending on information technology could reduce the need for so many health-care workers. It’s a truism in economics that investment boosts productivity, and the U.S. lags behind other countries in this area. One reason: “Every other country has the payers paying for IT,” says Johns Hopkins’ Gerard Anderson, an expert on the economics of health care. “In the U.S. we’re asking the providers to pay for IT” ? and they’re not the ones who benefit.

I’m not sure what to think about this. In one sense it’s just statistical trickery: at any period in American history, if you remove the single fastest growing industry from the picture then the rest of the economy is going to look pretty anemic. In fact, that’s true of nearly any statistical analysis: remove the highest scorers or the highest earners or the highest anything else, and by definition, what’s left over looks a lot gloomier.

On the other hand, deliberately running an entire industry less efficiently than the rest of the world is a helluva thin reed on which to base an economy. As Anderson says, since taxpayers are the ones footing the bill for healthcare in other countries, they’re more willing to pay for technologies that cut costs. In America, doctors bear the burden of adopting IT enhancements but don’t make any money from them (they might make less, in fact), so they’re pretty unmotivated to bother with the whole thing.

The fact that this inefficiency means we employs a lot more people than we would if we had a rationally run system is hardly a great rallying cry for the status quo. A national healthcare system, besides being tremendously beneficial for the actual consumers of healthcare, would also align market incentives more reasonably and reduce costs considerably. I’m willing to take the risk that we’ll somehow figure out what to do with all the jobs and money we save along the way.