Monday, September 7, 2009

Healthcare Jobs

My last post finished with a question: Where are the new jobs going to come from?

A reader (Juanita de Talmas) commented that, after the dotcom and real estate bubbles failed to generate jobs in a sustainable fashion, healthcare is likely to implode next. I find this an intriguing subject and today - Labor Day in the U.S. - I will look more into it, also taking into account that a devoted follower of this blog (Thai) is in healthcare and frequently provides valuable insights.

The original question is modified thus: Can healthcare provide the additional jobs needed for an economic recovery?

First, as always, some data in chart form.
  • Job creation in healthcare significantly outpaced overall employment for many years and is still going strong. In August, when overall non-farm payrolls were down -4.3% from last year, healthcare jobs grew by +2.3%.
  • This divergence in job creation has been happening for many years. Today, more than one in ten working Americans is employed in the healthcare services field, up from one in thirteen fifteen years ago (* see note below the fold for healthcare manufacturing jobs).
  • It's no secret why this is so: spending on medical care has exploded in the last 25 years, and now accounts for a whopping 20% of personal consumption expenditures and 14% of GDP.
  • The United States spends far more on health than any other nation in the world. According to the World Bank, it spends 15.4% of GDP when Switzerland spends 11.5%, Canada 9.8% and - surprise, surprise - Sweden 9.1% and Denmark 8.6%, both presumed "nanny states".
Data: World Bank
  • But what are we getting in return, what is the bang for our buck? Pretty terrible, I'm afraid. As an example, take infant mortality (deaths of infants under one year old per 1,000 livebirths) and multiply by the above spending as a percentage of GDP. The result is the chart below - and by this measure alone we are a sad laggard in healthcare efficiency.
Data: World Bank

The answer to the jobs question becomes pretty straightforward, therefore: No, healthcare cannot generate many millions of new jobs because it is already overstretched and inefficient, most likely crowding out other essential spending, e.g. investment on energy and transportation infrastructure.

Are there any signs that the consumption of scarce economic resources for healthcare services will stop growing unchecked? Well, of course: Obama's healthcare reform plans are, by design, geared towards avoiding the wholesale collapse of American household finances, particularly since the baby boom generation is "greying" fast. Despite cries of "where are we going to get the money?" the ultimate objective, I believe, is to spend less overall, not more.

*This total does not include related fields in manufacturing, such as pharmaceuticals and medical equipment makers (a combined 586,000 jobs in July). There is an interesting fact: such healthcare manufacturing jobs have not been growing at anywhere near the pace of healthcare services jobs. In fact, those two sectors combined now employ 2.7% fewer workers than last year. No manufacturing sector is immune from relentless Chinese outsourcing, even much vaunted healthcare.


  1. healthcare is an income redistribution system, alot like government taxation. taxes are being deducted regardless of the opinion and desire of the tax payers, healthcare comes as take-it-or-leave-it benefit to employees. for that reason, if not kept in check, it reduces disposable income and lowers the living standard of recepients.

  2. to bb:

    Very good analogy with taxation.

    And perhaps for that reason healthcare insurance costs should be progressively scaled like income taxes. Right now insurance costs are a horrible "head" tax, i.e. X thousand dollars per person.

    We should do for healthcare what Roosevelt did for pensions with Social Security - deducting, say, a graduated 2%-15% of income direct form the source as a payroll tax to fund a national healthcare system.


  3. I cannot find the exact page number, but twitmonkey Alan Greenspan, as front for the private bank cartel known as the Federal Reserve, and, to a lesser extent, Elaine Chao, George W Bush's dimwit Labor Secretary, have both chirped "health sciences" as the ONLY jobs left in the US. IT to India. Manufacturing to China, so yes, indeed, the offshoring of US jobs is planned.

    Trouble is, The Plan runs exactly counter to what Adam Smith expressed in The Wealth of Nations. Trying to force everyone left in the US into health sciences jobs ignores aptitude and attitude.

    Adam Smith , The Wealth of Nations:

    But it would be otherwise in a country where the funds destined for the maintenance of labour were sensibly decaying. Every year the demand for servants and labourers would, in all the different classes of employments, be less than it had been the year before. Many who had been bred in the superior classes, not being able to find employment in their own business, would be glad to seek it in the lowest. The lowest class being not only overstocked with its own workmen, but with the overflowings of all the other classes, the competition for employment would be so great in it, as to reduce the wages of labour to the most miserable and scanty subsistence of the labourer. Many would not be able to find employment even upon these hard terms, but would either starve, or be driven to seek a subsistence either by begging, or by the perpetration perhaps of the greatest enormities. Want, famine, and mortality would immediately prevail in that class, and from thence extend themselves to all the superior classes, till the number of inhabitants in the country was reduced to what could easily be maintained by the revenue and stock which remained in it, and which had escaped either the tyranny or calamity which had destroyed the rest.

  4. "We should do for healthcare what Roosevelt did for pensions with Social Security - deducting, say, a graduated 2%-15% of income direct form the source as a payroll tax to fund a national healthcare system."

    A competent engineer does not start work on a new product until he has proven the current one.

    And what is the state of SS a half-century plus later? Hopelessly overburdened and underfunded. If the government cannot successfully run SS, how can we expect it to take on healthcare?

    Let's be honest, like SS, government healthcare is nothing more than an increase in taxes.

  5. bb, yes and no.

    "Yes", there is a lot of income redistribution going on in the health care arena (really more at the level of Medicare and Medicaid than private health insurance which is why those two programs are greater time bombs than anything else).

    But also "no", as you have to remember that moral hazard is still alive and well in health care.

    Remember how Hell showed CDSs changed the system itself as everyone altered risk appetite lured with a false sense of security that insurance would protect them?

    (... And yet most interestingly Hell does not want to get rid of CDS as he still sees their legitimate use?)

    It is the person with good insurance who spends most of the money in the system.

    Indeed two otherwise identical people (age, etc...) with the same severity of chronic medical illness- except one has good health insurance and the other has no health insurance- will spend very different amounts over their life time. Predictably, the person with no insurance spends 50% less than the person with good insurance over their lifetime (understand they are getting care in America, a point which is often missed); of course the uninsured person has a shorter life span (but only slightly).

    @Hell, nice post and Kudos

    re: "perhaps... healthcare insurance costs should be progressively scaled like income taxes".

    My response: "if you think health care is expensive now, just wait till it's free"

    You are still trapped in a moral matrix.

    Again, look back at the OECD data I gave and look at out of pocket spending by Americans vs. any other OECD country.

    Then remember, it is a NON_LINEAR system... Perhaps it helps to think of the analogy of billionaires???

    Though billionaires own most of the money in America, most people will never meet a billionaire their entire life.

    Perhaps the following points will help you understand the issue a little better:

    1. The mentally ill spend more of our money than any other group (or if you want the primary source from in health affairs)

    How will a graduated system of funding control the consumption by a few mentally ill?

    2. Preventative medicine increases costs. While spending money to prevent a heart attack may be good value for that heart attack, since we all die, all we do is spend to lower one cost and then spend a lot again as we die from cancer a few years later (but we live longer for that higher spending).

    3. At the risk of get into rotting fish head arguments again, the Swedes have clearly showed that the most effective way to reduce alcoholism and all its commensurate costs is to tax CHEAP alcoholic beverages (it doesn't make a difference if you tax expensive alcoholic beverages). Remember, a small percentage CONSUME most of the resources????

    4. Insuring an uninsured person increases health care consumption by 50% (but it also increases life span a little)

    It is one thing to ask Americans to let their mothers/fathers, husbands/wives or children die a few weeks earlier so Marcus needn't experience bankruptcy for his appendicitis so that he can go back to work. It is quite another to ask the same of Americans for the guy that won't work and just shot a police officer or the person who infected his heart valve for the second time from shooting heroin after rehab sadly didn't work.

    You are starting to understand the issues but are not there yet.

    How much diversity of behavior are you willing to personally sacrifice for? How much diversity of behavior will you sacrifice your family for?

  6. Thai:

    "It is quite another to ask the same of Americans for the guy that won't work and just shot a police officer or the person who infected his heart valve for the second time from shooting heroin after rehab sadly didn't work."

    I nominate Thai for Supreme Enlightened Ruler and by default in charge of the Death Panel.

  7. Marcus, you are intent on nominating someone since you are the one who wants to centralize all this under one person

  8. Oh, sorry, I meant to add one other point to keep in mind:

    According to the brother of Obama's chief of staff EJ Emmanuel (he works a few blocks up the road from me), end of life care is 12% of all health care spending and Medicare spends 25% of its money in the last year of life and 40% of that in the last 30 days.

    Again, since Hell said "I am going to comment on the health insurance issue from a slightly different angle.

    I believe universal, publicly funded health care is primarily an ethical, or moral issue. Once we agree, as a society, that everyone should be covered regardless of ability to pay, then the rest of the discussion becomes mostly technical."

    So what if the end of life comes at age 40? Would that change how you spend money? And what model would you use to decide this?

    At least people like Marcus have an excuse as they simply are not that bright and just don't see the connections between issues in the economy and have no ethical qualms getting you to pay for the behavior of others as it really doesn't bother him if school budgets are cut as a result of his behavior.

    Further I seriously doubt he has a clue what happens to heroin users in (say) England who need surgery when they infect their heart valves for a second time.

    But I know you do not have that excuse (and I am not asking you to answer me either, just to think about the issues).

    How do you want to spend your money? What is high value? What is low?

  9. And Marcus, remember that if Obama wins and appoints the first czar, like the supreme court, appointments will periodically change political hands.

    One day a new version of Bush/Cheney will appoint their czar.

  10. So... health care finally hits the front page here.
    It's been on the back burner for quite some time, now, hasn't it ?
    Thai, for once I am going to take exception to your morally and ethically superior little take on the mentally ill.
    You guys need to hear some IRRATIONAL points of view to remind yourselves that you are not... THINKING MACHINES, are you ?
    It so happens that I hang out with people who have had the dubious distinction of getting caught with those cute psychiatric diagnoses that the DSM came out with (yup, right in line with all YOUR expensive, specialized and taylorized medical care).
    These people have income allowances in France. Yes, they have health insurance. No, most of them are not working. Why not ? Not because they won't work (no, that's ME who won't work and I'm not psychotic...), but because they can't work. They fall apart under the stress at the job here, and most of them have very few qualifications anyway.
    They are extremely sensitive, artistic, caring people who are DIFFERENT, from YOUR point of view.
    I get *'ing tired of hearing just how much they're spending YOUR money when their "allowances" barely allow them to live decently.
    The more people society punitively disqualifies and excludes, the more it impoverishes itself and ultimately works towards its own destruction.
    No, we are NOT logical at all. If we were, we wouldn't be running around pointing fingers and punishing the hell out of everybody these days.
    And we would be getting a little more INCLUSIVE.
    For what it's worth, I have health insurance, and GOOD health insurance, but that doesn't mean that I run out and go to the doctor once a week when I get a little pain somewhere, just because I can afford to.
    Health care is a bubble, among other reasons, because... STATISTICS tell everyone that there are jobs in healthcare, so... people train to become health care providers because there're jobs and the whole specialized mess just gets worse, because everybody is saying to him/herself "that's where the MONEY is/JOBS are.
    That's how you get an economy with no butchers (a problem here) and lots of geeks running around in white coats.
    Adam Smith was a very intelligent man. Too bad our leaders are no longer reading him (if they ever did).

  11. Marcus, I thought you might find this interesting from Jesse's Cafe Americain. I completely agree with his assessment of a rise in fascism. Indeed his references to an article from Yo's favorite rag counterpunch, is priceless.

    So which will it be:

    A. Spend more money to avoid fascism as Jesse's article is suggesting Obama do and most liberals want?

    B. Lower costs by cutting out someone else's consumption but still not ration care? If that is the case then who? Insurers (that won't save much)? Drug company profits (say goodbye yet again to our kids future)?

    C. Conserve on behaviors causing high costs (like stop shooting each other)? (Thai's preferred solution but not popular with Marcus as he does not mind other people paying for his behavior one bit)

    C. Ration care? If so, whose care get's cut?

    Remember, Hell says "the ultimate objective, I believe, is to spend less overall, not more.".

    While I partially agree with Hell's assessment (I think universal coverage is actually a higher priority for some, including Obama himself), it is one thing to have an objective but another to reach that objective.

    From the link that I think (Yoski?) once forwarded the rest of us, national health care inflation differences since 1980 do not make America look so bad.

    It seems few countries are achieving their cost containment objectives and America has actually done rather well since 1990 compared with many European countries (though to be fair to high UK inflation, they were starting from the lowest %GDP of any OECD country in 1990).

  12. I completely agree with various points made by Thai.

    Progressive health care tax to insure everyone is as bright an idea as creating Fannie/Freddie to make sure everyone has a house. We know how the later experiment worked out.

    Thai, do not expect Hell to learn any better. He is a commie. Always expect him to come up with brilliant statement of a problem followed by stupid, centralized solutions. You have to spend half your life in a communist country to understand how these people think.

  13. France is zero on cost containment.
    But looking at things through the prism of budgetary envelopes slants the whole problem anyway and makes it unresolvable.

  14. While I am inclined to agree with you in general, I would just like to say that infant mortality is not a great way to measure the efficacy of "health care" in various countries. There are a lot of other things that "health care" money is spent on--I was venture to guess that pre-natal and post-natal care is a very small portion of the total. In any case, I don't think it's necessary to prove that US health care is better or worse than other industrialized countries, simply that the amount of money spent is unsustainable, and that the whole point of "health care reform" was to cut the rate of increase in spending (especially by the government).

    In this environment, it is difficult to see how health care can be an engine for job creation. After all, generally speaking, only the government is willing to go into debt to pay for health care--most private buyers (or their insurance companies) can only pay cash. Health care, unlike housing, does not offer much in collateral for loans--no one will lend me money to fix a gimpy knee on the premise that I will be worth more as a result. Therefore, private borrowers are generally restricted from taking on large amounts of debt to pay for health care--draw down savings, yes, but not go deeply into debt (correct me if I am wrong--I know that health care costs are a leading cause of bankruptcy, but my impression is that the deficits are in the tens of thousands and not significant in the larger issue of money creation. I'm not trying to be cavalier about anyone's individual experiences, just that you as a person can't take on housing-like debt for health care expenses.)

    Consequently, the only driver of consistently increasing spending--and therefore job creation--is the government.

  15. re: "no one will lend me money to fix a gimpy knee on the premise that I will be worth more as a result."

    Ah, my favorite health care analogy- the knee!

    The funny thing about orthopedic knee replacement surgery for severe knee pain is that studies consistently show weight loss is MORE EFFECTIVE than knee replacement surgery. It is also a lot less expensive and has the added benefit of improving mortality at the same time.

    The only problem is that people find weight loss a lot harder than surgery, especially when someone else is paying for it (like our kids).

  16. It's time to bring the rest of the healthcare spending out into the open also. Our prison system has become the largest provider of mental health "care" in the country - and is the only mental health facility that cannot turn away patients.

    Being married to a nurse working in a women't prison, I hear the stories daily about the untreated addictions and cases of untreated mental illness that were the root cause of the violent and nonviolent crimes of many prisoners.

    Our prison system has become the custodian of last resort for these people who need long term in-patient mental health care, but at a much higher price.

    ... But look how much we have "saved" as a society by closing the state mental hospitals over the last 20 or 30 years, and how much we continue to "save" by not treating drug addictions.

    I don't think I can afford much more of this "savings" by the health care industry

  17. @ Thai: You're stampeding me to knee-replacement surgery when all I need is a little scoping--sounds like my wife :>)

    Seriously, you raise an excellent point--many times better health care outcomes could result from simple lifestyle changes and preventative measures instead of surgeries and extensive procedures. But as far as creating jobs, the easy things don't get us anywhere. In fact, if we didn't keep pissing money away in healthcare, we'd really be in trouble for jobs. . .

    I'm being facetious, but the glazier and the carpenter like to fix those broken windows. . .

  18. But what do I know- Amen. We physicians definitely play a role in this whole mess.

    Remember, at least imo, health care is the ultimate tragedy of the commons

    Anon, you make a very good point.

    But apart from the bigger civil rights issues which ultimately led to the releasing of everyone from the mental institutions as movies like one flew over the cuckoo's nest showed America the downside of such a system, the reality is the health care system cannot "solve" every health issue. We can't cure the common cold much less many cancers (although some we have made amazing strides on) much less issues of manipulating the mind... And I am sure Deb and Yo will get into the "fix it to what?" dilemma. As if we have a clue understanding the complexity of the human mental "ecosystem" and know what the right thing to do is.

    We can spend our money figuring out how to fix these all these issues (which is different than servicing them) but consumption to do that would need to come from somewhere else- or I guess we could just continue to borrow from the Chinese? And spending our money this way will do nothing to resolve the anger many feel towards drug industry profits or FDA.

    We are all connected in this society on this little planet and the sooner we come to realize it the better. We think we can push our personal problems onto our neighbors but the reality is once we all do this who is left to push our problems onto?

    Marcus may think he can just push his personal behaviors off on the rest of us and we will all go with the flow, but if I am willing to give a little of my time on this planet or that of my wife or kids for others under certain circumstances, imagine the conversation I am going to have with Marcus before I do first.

    How do we want to spend (read consume) our money?

  19. * Certainly the healthcare industry can't absorb that many people. And not everyone is suitable for employment in the field (lack of empathy, fearful of math/science, or just plain squeamish).

    * It seems whenever I read about a new medical discovery lately, the researchers are from an Asian or European university. Are US universities too in league with corporations to publish without charge?

    * America is weird and therefore hard to compare with other countries. In our diversity of choices, some have chosen unparalled self-destruction. Its very kind of the rest of the citizens to want to shield them from the consequences of their actions, but it won't work. National healthcare for people under 18 (who haven't dropped out of high school) might be manageable.

    * Maybe someone should start a subversive club made up of healthy people. Some sort of underground organization where the members won't smoke, overeat, or overdrink. Every 6 months you submit some blood/urine for lab work to prove you're still eligible. FIGHT THE POWER!

  20. the u.s. healthcare system is so rigged that there is no fixing it with tweaks in its present form and state. suffice to say it is 2 times as expensive per capita relative to switzerland or france, countries with exemplary healthcare systems the world over.
    and how can you fix something that:
    - hides the cost from the actual bill payer;
    - allows for no competition among insurers;
    - there are no actual cost controls from insurers due to zero incentives (the employer will simply be billed more next year).

    i can go on and on, but you get my point: healthcare in the u.s. is a system for raping employees by hiding from them their actual insurance premia and presenting them as "benefits". everyone in this criminal ring lives high times, just think about it: is there even one doctor you know who does not have 2 homes and at least 3 cars? most of those are not life savers.

    make health insurance payments private: no tax deduction for businesses, make people pay for it directly, allow competition between insurers, allow for tiered insurance plans, and only then we will see a system that is at least a tiny bit more altruist.

  21. Quite some time ago on this blog I mentioned the issue of France's attitude toward prenatal care, and the response of an American financial institution consultant to my exposition of the problem.
    France has/had very good prenatal care (but we're always copying you guys, so it's going downhill fast).
    That care comprised : monthly visits to the obgyn, 100% paid for by the system, two echographies, one at the end of pregnancy to ensure that the baby's head would pass at a natural delivery, and... at least a week in hospital for delivery. Earlier generations had TWO weeks in hospital for delivery ; I had eight-10 days.
    A woman who is experiencing a difficult pregnancy can get paid leave from her job, too.
    Sounds expensive, right ?
    Just WHAT price tag are you going to put on the experience of being taken care of by mostly competent people, thereby helping mother and infant in an extremely delicate situation, and giving them a "good" start in the most important relation any human being will have, that initial one with his mother ? (This can be discussed, but mama has all those hormones circulating to ensure that she's receptive to her infant.)
    When society pays for good prenatal care, and helps its members adjust to difficult life circumstances, then the BENEFITS that it will get out of this help are priceless and intangible.
    Why do we insist on breaking things down into cost/benefit, and insisting on numbers for everything ? Because we're... DUMB and misguided.
    Needless to say, the American financial consultant just COULDN'T UNDERSTAND why he should be paying for SOMEBODY ELSE'S care.
    The effects of an atomized, individualistic society, once again...

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  23. I lay the responsibility for our "health care" predicament, and many of our seemingly intractable difficulties on, what is by now, a most overripe epoch in human history, The Enlightenment.

    Yes, that hoary movement that informed such immortal tracts as The Rights of Man and The Declaration of Independence. And no right thinking, red blooded, American doesn't love such lofty epistles as those, do they? Damn skippy they love them, even if they never heard of them. Such is the majestic (or is it just magic) power of The Enlightenment.

    I dare say most men and woman here in the U.S., and in many other parts of the West for that matter, have tremendous expectations regarding their treatment, (no pun intended) that are owed, in no small part, to a movement that insisted that each of us are noble individuals with considerable intrinsic value and worth who must be treated-there's that word again-accordingly, damn it!

    Where has it all led to? Well, with the advent of advances in technology and such, it has led to, for example, overweight personages with bum knees and bad tickers, who also happen to suffer from diabetes and clinical depression, fully expecting any and all therapies to be applied to all the aforesaid ailments, pronto!

    Well, we can't put The Enlightenment genie, tattered and patchy in its application though it is, back in the mud encrusted old bottle, but there it is, making an absolute mockery of the very idea of rationed care. And that's just for starters. What is left for a Commander in Chief to do except be less than forthright (some, like the poor, dumb Congressman from South Carolina, call it lying) about just what his intentions are.

    Just an unorthodox, and sure to be unpopular view from the cheap seats.

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  25. Debra,
    you are clueless about math, therefore any healthcare services for you are priceless.
    let me show you what is actually the price you would pay if you have 3 kids in 10 years.
    as per your suggestion, you would get an extra week for every pregnancy, this is 3 weeks in 10 years, which consist of 520 paid weeks. for those 10 years you would pay $5,000 extra in coverage, or $50,000 in total. the other 30 years you will be shortchanged by your healthcare plan, we can leave aside for now.
    this means, for every week of extra leave, your income is cut by $17,000. wouldn't you rather take a week of unpaid leave for your pregnancy and pocket the extra $17,000?
    the answer is NO only when your income is above 52x$17,000 or $884,000 per anum.
    i think you need more urgently introductory math education than healthcare.