Obamacare Resulting in Hundreds of Thousands of Jobs Being Lost

     Drs. Coburn and Barrasso releases new health care report, and the consequences of "Patient Protection and Affordable Care Act" worse than anticipated.  One section reports on the impact this new law has on jobs. Full report available here.

Stifling Innovation and Jobs 

It is not only hospitals that are seeing health care jobs threatened. Companies that innovate, create, and develop life-saving, life-improving devices will likely lose jobs too. Manufacturers of medical devices are reeling from a provision of the law that will levy a $20 billion excise tax on their industry.  The Boston Globe reported that the “2.3 percent excise tax on companies that supply medical devices like heart defibrillators and surgical tools to hospitals, health centers and ambulance services,” will force industry leaders to “lay off workers and curb the research and development of new medical tools.” One CEO said the new tax threatens his business’ sustainability because it has relegated his company’s profitability to merely “a break-even position.”   

The basic problem with the tax is one of math. “‘Many small to midsize medical device companies will owe more to the federal government in taxes than they make in profits,’” according to Mark Leahy, head of the Medical Device Manufacturers Association. "We're talking about a 2.3 percent tax on total sales, irrespective of whether a company is making a profit." The device tax will hamper innovation, since the amount of money available for a company to reinvest in its business development will be reduced. Some companies are already contemplating moving jobs overseas to avoid losing their competitive edge. Outsourcing is just one of many adverse unintended consequences of the new law

Before the health care legislation became law, proponents of the overhaul claimed that health reform would create jobs. At the White House health care summit in February, the Speaker of the House of Representatives asserted the federal health care overhaul would create “400,000 jobs almost immediately,” both in the health care industry and “in the entrepreneurial world as well.” However, recent independent reviews have contradicted such rosy scenarios and found the legislation will wipe out hundreds of thousands of jobs.

Non-partisan Experts Conclude Health Overhaul Reduces Labor Force By 788,000 Jobs 

The non-partisan Congressional Budget Office (CBO) released an analysis of the “effects of recent health care legislation on labor markets.” The CBO’s findings painted a troubling picture. The massive Medicaid expansion will “encourage some people to work fewer hours or to withdraw from the labor market.” Additionally, phasing out the subsidies to buy expensive insurance “will effectively increase marginal tax rates, which will also discourage work.” CBO said “other provisions in the legislation are also likely to diminish people’s incentives to work.”

The CBO “estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply”, which is more than 788,470 employees.  Another independent estimate predicted the overhaul will “destroy a total of 120,000 to 700,000 jobs by 2019.” This is a huge number of future jobs and future workers that will be effectively sidelined because of the health reform legislation. With more than 14 million Americans out of work today, we cannot afford to lose more jobs. 

New Provisions Kill Health Care Industry Jobs

The CBO’s analysis did not even take into account the overhaul’s job impact on specific industries. Unfortunately, the lost jobs count can be expected to climb even higher because of a simple provision tucked into the legislation. Section 6001 of the health overhaul prohibits hospitals owned by physicians from expanding and denied Medicare reimbursements to any physician-owned hospitals not certified by Medicare by the end of the year. 

According to a Washington Times report, “the Physician Hospitals of America (PHA) identified 39 projects under development whose owners had cancelled outright, knowing they could not win Medicare certification by the end-of-year deadline, plus another 45 that will be hard-pressed to meet Medicare certification criteria in time.” Sadly, according to PHA conversations with its member hospitals, the cancelled projects could have created “roughly 25,000 jobs.” As the Times article notes, the “job-killing provisions” of the overhaul are “particularly ironic given that physician-owned facilities tend to be economically efficient and deliver superior medical outcomes.” 

Ironically, while the new law has made it illegal for physicians to have further ownership in a hospital, the law has the effect of increasing a hospital system’s “ownership” of an individual physician.  The legislation embraces a pilot payment model of “Accountable Care Organizations” (ACOs).  While integrated care delivery teams are a good goal, the manner in which the legislation designed ACOs could accelerate the trend of physicians leaving private practice to work in a centralized hospital setting.  Over the next three years, three in four hospitals or health systems reported they plan on hiring more physicians, and more than half said they will buy entire medical practices. 

A former policy advisor at the Centers for Medicare and Medicaid Services (CMS) described the approach of the law as envisioning “that doctors will fold their private offices to become salaried hospital employees, making it easier for the federal government to regulate them and centrally manage the costly medical services they prescribe.”  The former CMS official suggested that the centralization of physician employment has already begun, noting that “in 2005, more than two-thirds of medical practices were doctor-owned, a share that was largely constant for many years. By next year, the share of practices owned by physicians will probably drop below 40 percent, according to data from the Medical Group Management Association.” Even a White House official who helped push the overhaul through Congress recently admitted in an article that “the economic forces put in motion by the [health legislation] are likely to lead to vertical organization of providers and accelerate physician employment by hospitals and aggregation into larger physician groups.”  

Coordinated care is admirable, but greater consolidation of providers under a hospital would increase a hospital system’s market share and negotiating power over remaining providers.  With less choice and competition in the health care marketplace, costs to consumers would likely increase even further. As the Center for Studying Health System Change concluded from a recent study of California’s experience in similar attempted reforms, “proposals to promote integrated care through models such as accountable care organizations could lead to higher rates for private payers.”  In other words, consumers could pay even more for health insurance and health care.