A recent study revealed that the increasing health care prices in the U.S. are causing employers outside the health care industry to reduce their workforce and lay off middle-class workers.
The research, co-authored by Yale economist Zack Cooper and published by the National Bureau of Economic Research (NBER), found that rising health care prices prompt non-health care employers to downsize, resulting in a decline in aggregate income by approximately $8 million per year for an average county with a mere 1% increase in health care prices.
Conducted by a team of economists from various institutions including Yale, University of Chicago, University of Wisconsin-Madison, and Harvard University among others, the study emphasizes the negative impact of escalating health care costs on the labor market.
Cooper highlighted, “When health care prices go up, jobs outside the health care sector go down. Middle- and lower-income workers bear the brunt of rising health care expenses, often leading to job losses, thereby exacerbating economic inequality.”
To understand the correlation between health care cost spikes and labor market repercussions, the researchers analyzed insurance claims data, health insurance premiums from the Department of Labor, and IRS data covering a decade from 2008 to 2017. This comprehensive approach traced how increased health care expenses flow through to affect health spending, insurance premiums, payrolls, income, and unemployment rates in different counties, impacting federal tax revenue as well.
Zarek Brot-Goldberg, an assistant professor at the University of Chicago’s Harris School of Public Policy, pointed out, “Workers themselves bear the burden of rising health care prices, not just insurers or employers. Understanding this is crucial as escalating health care costs adversely affect employment outcomes even for individuals not directly utilizing health care services.”
The study leveraged hospital mergers as a means to assess the consequences of price hikes. Examining over 1,000 hospital mergers between 2000 and 2020 in the U.S., the researchers found that on average, such mergers increased prices by 5%, leading to substantial economic repercussions.
Stuart Craig, an assistant professor at the University of Wisconsin-Madison Business School, pointed out, “Our analysis indicates that a 5% price increase due to hospital mergers can result in significant negative outcomes including lost wages, job losses, reduced federal tax revenue, and even fatalities of workers not associated with the health sector.”
Moreover, the study revealed that the ripple effect of hospital mergers contributing to rising health care expenses leads to higher government spending on unemployment benefits and reduced federal tax revenue, compounding the economic strain.
Cooper emphasized, “The surge in health care prices in the U.S. has a detrimental impact on the economy, resulting in fewer job opportunities and triggering various consequences associated with unemployment.”
Other contributors to the study included Lev Klarnet from Harvard University, Ithai Lurie from the U.S. Department of the Treasury, and Corbin Miller from the U.S. Internal Revenue Service.
