Hospital Price Increases Lead to Job Loss
By Consumers for Quality Care, on July 8, 2024
A study published by the National Bureau of Economic Research (NBER), and reported by The Wall Street Journal and Axios, found a correlation between soaring hospital prices and job loss, specifically price increases that resulted after a health care merger took place.
Most Americans get health insurance through their employer. But when hospital prices rise, it drives up the cost of insurance, forcing employers to pay more. This puts employers in a bind: If they can’t afford the continued increases in health care costs, they may decide to hire fewer workers going forward. In some circumstances, they may even have to lay workers off. According to Zarek Brot-Goldberg, an Economist at the University of Chicago and one of the researchers of the NBER study, said, “employers that face increases in healthcare spending respond by laying off workers who they can no longer afford to retain.”
The study specifically looked at communities where hospital mergers took place between 2010 and 2015. Advocates for hospital mergers have long argued that consolidation among health care systems increases the quality of care for consumers while also lowering prices. But research shows that these mergers usually have the opposite effect. This study found that in communities where hospital mergers took place, hospital prices went up by one percent, which led to a loss of jobs, also by one percent. Another researcher involved in the study, Zack Cooper, a Health Economist at Yale University, noted the correlation, stating, “that’s one of the, I think, incredibly subtle but sinister consequences of rising health spending. It leads individuals to lose their job.”
Because employers typically pay the same amount for each employee’s health insurance coverage, job loss disproportionally affects middle-class earners that make less than $100,000 annually. Assuming an employer spends $10,000 for health insurance premiums for each employee, it makes more financial sense to lay off two employees making $50,000 as opposed to one employee making $100,000, since the employer would save $10,000 by electing to go with the former option as opposed to the latter.
Both Congress and the Biden administration have been working to address the harmful consequences of hospital mergers by scrutinizing deals that are anti-competitive and anti-consumer.
Rising health care prices come with an even higher price through job loss, and health care mergers are a persistent reason for skyrocketing health care costs. Decreased competition hurts consumers, often leading to fewer options for care and higher out-of-pocket costs. CQC urges regulators and lawmakers to scrutinize mergers in the health care system and work to ensure that consumers do not bear the brunt of anti-competitive practices.
