Rising health care costs hurt the economy and increase death rates

August 2, 2024

Academic researchers in collaboration with data scientists at the Internal Revenue Service (IRS) published a pre-print this spring exploring the impact of allowable charge increases on labor force and the economy. This is an ingenious study; the researchers evaluated the impact of hospital mergers from 2010-2015, which caused an average price increase of 1.2% in these communities. They used medical claims from the Health Care Cost Institute, Department of Labor filings for health care costs, and individual tax filings from the IRS. About a fifth of mergers led to a 5% increase in prices.

The researchers found that a 1% increase in prices was associated with

-        Decrease of employment and payroll of 0.37% outside of health care, and no change of employment or payroll in the health care industry or in self-employment.

-        Labor income decrease of 0.27%

-        Decrease in income tax payments of 0.4%

-        Increase in unemployment payments of 2.5%

The labor impact of rising health care costs from hospital mergers was borne by those making between $20,000 and $100,000. Those earning under $20,000 were likely not on employer sponsored health insurance, and higher wage workers were not affected since health insurance costs make up a smaller portion of their total compensation.

The researchers also found that a 1% increase in health care prices led to a 2.7% increase in deaths from suicides and overdoses (1 additional death per 100,000.)  This is 1 extra death for every 140 individuals who lost their job due to health care price increases.

A hospital merger that led to a 5% increase in hospital costs would lead to 203 job losses, $32 million in foregone wages, $6.8 million in lower federal income tax payments, and 1-2 additional deaths from suicide or overdose, with aggregate harm of $42 million.

There were over 1000 hospital mergers from 2000-2020, and the researchers found that over 99% of commuting zones in the US that had a hospital were exposed to a merger within or adjacent to that commuting zone.

Implications for employers:

-        This research shows that higher health care costs lead to fewer jobs and less economic activity, and disproportionately impact those with lower wages.

-        Job losses from health care cost increases lead to more “deaths of despair” from overdoses and suicides.

-        Effective efforts to control health care costs can improve the economy and save lives.

Thanks for reading.  You can find previous posts in the Employer Coverage archive

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Monday: Few with opioid use disorder are given medication therapy