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The Honolulu Advertiser
Posted on: Monday, January 11, 2010

Study says health reform will save money, create jobs

By Duke Helfand
Los Angeles Times

Hawaii news photo - The Honolulu Advertiser

President Obama, followed by Vice President Joe Biden, has made the economic benefits of health reform a top selling point.

EVAN VUCCI | Associated Press

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Hawaii news photo - The Honolulu Advertiser

Senate Finance Committee Chairman Sen. Max Baucus, D-Mont., center, spoke at a health care news conference in Washington. From left are Sen. Patty Murray, D-Wash.; Sen. Richard Durbin, D-Ill.; Sen. Charles Schumer, D-N.Y.; Senate Banking Committee Chairman Sen. Christopher Dodd, D-Conn.; and Senate Majority Leader Harry Reid of Nevada.

HARAZ N. GHANBARI | Associated Press

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LOS ANGELES National health care legislation in Congress could slow the growth of medical costs, allowing employers to create 250,000 to 400,000 jobs a year over the next decade, economists from Harvard University and the University of Southern California are predicting.

Wading into the hotly debated issue of whether the legislation is a job creator or a job-killer, researchers from the two universities say that the reforms under consideration would slow the rate of cost increases and free money for companies to raise wages and hire more workers.

Specifically, health care savings could be achieved by proposals for greater competition in insurance markets, better coordination of health care and shrinking administrative expenses, they said in a report released Friday. With those changes, employers could then reallocate money that is now spent on ever-growing premiums to other business priorities including more hiring and wage increases.

"We could achieve huge productivity gains," said Harvard economist David Cutler, one of the study's authors and a senior fellow at the progressive think tank Center for American Progress.

But conservative economists and many business leaders argue that the proposed legislation would drive up costs by imposing billions of dollars in new taxes and penalties, killing jobs and hurting the economy as the financial burden of health care shifts to employers and workers.

One analysis from the conservative Heritage Foundation determined that higher taxes levied on the wealthiest Americans a proposal in the health care bill approved by the House in November would eliminate more than 450,000 jobs over the next decade.

The foundation and other critics of the health care overhaul say such taxes would have a particularly harmful effect on small businesses, which operate on smaller margins but have historically played key roles in renewing economic growth after recessions.

"If small businesses are not hiring, you'll have higher unemployment and slower wage growth," said Rea Hederman Jr., a senior policy analyst at the foundation.

Several California employers said they find the Harvard-USC study hard to believe, given that the average employer has paid double-digit annual increases in insurance premiums for several years and other escalating business costs.

Santa Monica attorney Jeffrey Lee Costell says he will likely hold off hiring clerical staff if provisions remain in the health care legislation that require companies like his those with payrolls exceeding $500,000 to pick up the bulk of insurance premiums or face penalties.

"It's going to have a chilling effect," Costell said. "We're getting penalized because we are productive entrepreneurs."

Congress is preparing to hash out a compromise between House and Senate health care bills. The measures would require most Americans to have health insurance, expand Medicaid coverage for the poor, stop insurers from denying coverage for pre-existing conditions and create "health care exchanges" to foster competition and choice.

The bills also would impose billions of dollars in new taxes on the insurance industry, with the Senate bill including the so-called "Cadillac tax" on more expensive health care plans.

The Harvard-USC report could be a boost for President Obama, who has made the economic benefits of health reform a top selling point in his administration's efforts to forge public support for the overhaul.

The Obama administration's Council of Economic Advisers said that health care reform would increase domestic growth, raising family incomes substantially and leading to significant new hiring of as much as 500,000 people a year.

The Harvard-USC economists concluded that industries with high rates of employer-sponsored insurance including manufacturing, utilities and financial services would see some of the most significant employment gains.

"If you have a strong bill that will promote control of health care costs, there will be an effect on the number of jobs," said Neeraj Sood, director of international programs at USC's Schaeffer Center for Health Policy and Economics.

How to achieve the savings remains a matter of heated debate in Congress and other quarters.

Insurance industry executives maintain that reining in premiums without also addressing surging costs of hospitals and doctors will do little to stem medicine's drag on the economy. Health care accounts for more than $2 trillion or 18 percent of the U.S. economy.

"Unless you have the entire system reduce costs, you won't get premium relief," said Jay Gellert, chief executive of Woodland Hills, Calif.,-based Health Net.

Relief can't come soon enough for San Francisco business owner Scott Hauge, who has seen health premiums for his 30-employer insurance brokerage rise 14 percent annually over the past seven years.

Hauge, president of the advocacy group Small Business California, said he doesn't expect much relief from Congress at best, a slow-down in his costs, as the Harvard-USC economists predict. He said he might use the savings to upgrade computers, to pay employee bonuses or perhaps to help pick up insurance costs.