Our health-care productivity problem, in one chart

at 03:05 PM ET, 10/13/2011

For months now, the health sector has led the economy in job creation, producing more than 300,000 more jobs since this time last year. Even as overall job creation sputtered last month, the health sector added 44,000 new positions.

But health-care job growth isn’t necessarily a good thing, at least when it comes to controlling our skyrocketing health costs. More health-care jobs mean more health-care spending, the opposite of what most health policy wonks want to see happen.

A New England Journal of Medicine article this morning really gets at this tension, between the good of job creation and bad of growing health costs. It suggests that a key driver behind our health-care job growth is a decline in productivity. We’re adding more workers, the article argues, because, in the aggregate, each health-care worker is doing less. And that’s the opposite of every other industry sector that’s growing right now. Take a look:

“Over the past decade, health care has been one of the primary drivers of job growth in the United States,” authors Robert Kocher and Nikhil R. Sahni write. “Unfortunately, these jobs have been added in part because the health system has not improved its productivity at the same rates as other sectors.”

Labor is a really important driver of health costs. As the New England Journal of Medicine study notes, salaries make up 56 percent of the $2.6 trillion we spend annually on health care.

Kocher, a former health-care adviser to President Obama, and I spoke this afternoon about why, exactly, productivity has dropped in health care. He attributes it to the current fee-for-service payment system, which pays doctors for each test, treatment or surgery they perform. “Doctors make more money by having more visits and doing more things,” he says. In a lot of ways, doctors stand to earn money by being less productive.

How much the health reform law will change that remains to be seen. The law includes a number of provisions that aim to move from a payment system that rewards volume to one that rewards quality. Much of that has yet to be implemented, and there’s a huge debate about whether it’ll actually work.

The bigger and more important point Kocher made to me was this: “When we talk about health-care job creation, we need to make sure we’re creating the right jobs. We do need health-care workers, but it’s important not to overshoot.” Health-care jobs will probably continue to prop up each month’s employment report. For jobs numbers, that’s great, but for health-care spending, it’s a worrisome sign.

 
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