New Jobs Through Better Health Care

Health Care Reform Could Boost Employment by 400,000 a Year this Decade

SOURCE: AP/Bob Child

National health care reform now being considered in Congress will affect employer-provided health insurance premiums in several ways and will add between 250,000 and 400,000 jobs annually over the next decade.

By David M. Cutler, Neeraj Sood | January 8, 2010

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One in ten Americans remains out of work today as the two-year-long Great Recession gives ways at last to a slow economic recovery. Dealing with persistent unemployment is one of the top priorities of President Barack Obama and the leaders of Congress. One important way to create jobs is to slow the growth of medical spending. If health care cost increases slow down, then businesses will find it more profitable to expand employment, and workers will more readily move into those new jobs.

This paper will demonstrate the potential impact of health care reform on employment growth in the new decade, examining two recent studies and then combing their estimates of potential employment growth. The first study, by health economists Neeraj Sood at the Leonard D. Schaeffer Center for Health Policy and Economics and School of Pharmacy at the University of Southern California, and Arkadipta Ghosh and José Escarce at Mathematica and University of California Los Angeles, shows the significant negative impact of rising health care costs on employment as firms struggle with health costs that they cannot pass along fully to workers or consumers. The second study, by health economists David Cutler of Harvard University and Karen Davis and Kristof Stremikis of the Commonwealth Fund, estimates that health care reform will slow the growth of healthcare costs and health insurance premiums.

In the analysis that follows, we combine these two studies to show that health care reform could increase the number of jobs in the United States by about 250,000 to 400,000 per year over the coming decade.

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David M. Cutler is a Senior Fellow at American Progress and Otto Eckstein Professor of Applied Economics at Harvard University. Neeraj Sood is an Associate Professor at the Leonard D. Schaeffer Center for Health Policy and Economics and School of Pharmacy at the University of Southern California.