Last week the National Center for Health Statistics announced that U.S. life expectancy had fallen slightly in 2008 to 77.8 years, versus 77.9 years in 2007. Clearly this decline was related to the recession, in some way. Nevertheless, it struck me as odd that in the same year life expectancy declined, employment in the private healthcare sector rose by 2.7%, faster than the 10-year average growth rate.
That observation made me think (again) about putting together a simple analysis of healthcare productivity. I understand quite well that this is a quixotic venture, since productivity is defined as output per worker and no one can agree on how to measure the output of the healthcare sector is. But I’m going to take it step by step, for transparency. Everyone is welcome to lob tomatoes, as desired.
Let’s start from the beginning. We don’t have a good measure of the output of the healthcare sector. However, population size is clearly related in some way to healthcare output (for a given level of ‘health’, we’d expect the output of the healthcare sector to rise with the population, holding demographic and income composition constant).
So here’s our first step. The chart below compares the 10-year employment growth in private health care services with overall population growth, and with growth of the 65-and-over population.
If productivity in the healthcare sector was rising, and the “health output” per American, however defined, was constant, then we would expect healthcare employment to rise slower than the population.
But in fact, you can see that healthcare employment increased much more than the overall population from 1998 to 2008. (26% vs 10%). FYI, the same was true during the recession–from 2007 to 2010, healthcare employment rose by about 6%, while the population rose by slightly less than 3%).
More important, the increase in healthcare employment also far outstripped the increase in older Americans (a 12% gain). That means the big growth in healthcare employment cannot be due to the aging of the population.
So in fact, we’ve already learned something. The rapid increase in healthcare workers per capita is by itself a key reason for rising healthcare costs–separate from the cost of new drugs, the capital expense for new technology, and the aging of the population.
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