In mid-June, Medicare’s Office of the Actuary published its annual estimate of national health spending projections for the coming decade. As usual, the document concluded that health spending would rise ever higher, from nearly $4.5 trillion in 2022, or 17.3 percent of the entire economy, to more than $7.7 trillion, and just under 20 percent of GDP, in 2032.
Most Americans’ eyes tend to glaze over at these lofty projections of ever-growing health spending — or the long-term fiscal predicament it causes. A new study, however, provides much more tangible evidence as to the true effects of rising health care costs. In some cases, it costs people their jobs.
Effects of Hospital Mergers
The study, released by the National Bureau of Economic Research, attempts to get behind the reasons health costs increase. In some cases, rising health care costs could result from people in an area becoming wealthier and therefore spending more money on care. The researchers controlled for this variable by examining areas where hospitals merged — because such mergers are associated with increasing prices but no commensurate increase in health care quality.
The researchers examined hospital mergers, of which there have been many in recent years, to conclude that a 1 percent increase in health care prices led employers outside the health care sector to reduce payroll by 0.37 percent. Economists would generally agree with this conclusion, due to the belief that the “employer’s” share of health insurance premiums ultimately comes out of employees’ pockets. With total compensation (wages and benefits) being
