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Health care used to be recession-proof. Not anymore

The tumble in health jobs caused by the coronavirus is likely to make the recession deeper and the recovery slower

May 08, 2020 / 11:06 PM IST

For more than half a century, in good economic times and bad, health care jobs in the United States just kept increasing. Economists and health analysts thought of them as nearly recession-proof, a buffer against the business cycle.

But like so many other patterns, the coronavirus pandemic has broken this relationship. Health care jobs have now fallen sharply for a second straight month as the virus and its fallout have discouraged Americans from using the health system.

“This is a disruption unlike any we’ve seen in decades,” said Ani Turner, co-director of sustainable health spending strategies at the Altarum Institute, which tracks trends in health care spending and employment.

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Turner recently wrote an essay titled “Health Sector Won’t Be the Backstop in This Downturn.”

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A sudden drop in health spending and employment amid a pandemic that is overloading hospitals with sick patients might seem like a paradox. But it reflects how the health industry tends to make its money: Treating patients for a deadly illness is far less profitable than offering them elective surgeries. When the federal government asked hospitals to stop such procedures to free up capacity, that changed their economics profoundly.

And even if various governments across the nation hadn’t then ordered such a pause, patients had reason to avoid doctors’ offices and hospitals, rightfully concerned that such places carried risk of contracting the coronavirus. Independent medical practices have seen huge reductions in their business as some patients connect with doctors virtually, while many others patient visits have simply vanished.

In previous recessions, the health industry has not taken such a hit. Because most Americans have health insurance, health services are more insulated from the business cycle than other kinds of spending. The biggest users of the system are older Americans. Besides being likelier to have health problems, they also tend to have comprehensive insurance coverage through Medicare and a stable source of income from Social Security. The Medicaid programme, which is structured to allow people to enrol when their incomes fall, tends to offer access to health care for the poor, even if their jobs disappear.

And, of course, many of the problems that send people to the doctor — heart disease, appendicitis, cancer or the flu — do not go away during a struggling economy. As a result, the doctors and nurses and medical assistants and billing clerks who work in health care are usually protected from an economic downturn.

But lately Medicare beneficiaries, the age group at highest risk of serious disease or death from the coronavirus, have been particularly spooked from seeking medical care. And emergency rooms have reported shocking declines in visits for what doctors had always thought of as life-threatening emergencies. A recent survey of nine major US hospitals showed visits for a common but serious kind of heart attack have fallen by nearly 40 percent. Those declines were seen even in places without major coronavirus outbreaks.

The industry still seems somewhat protected: Health care jobs have fallen by less than jobs in the rest of the economy. But in the Great Recession, as jobs of nearly every kind plummeted, health jobs kept growing at a good clip. In the eyes of many economists, it was health care that led the economic recovery by providing a powerful and reliable jobs engine. All those new health workers helped strengthen their local economies.

And in many places hit hard by the recession, the local hospital became a dominant employer, supporting entire communities. There were some small reductions in the use of health services in the following years; those led to a slowdown in what had been seen as the inexorable growth of health spending. Those changes, which earned the nickname ‘slowth’ among health care analysts, were unusual enough to be major news. Health care still grew, however, just more slowly. About 60 percent of health care spending goes to labour, so all the growth, almost by definition, meant new jobs.

That growth was seen as good news in the short term for the economy. But health care’s ever-growing share of the national economy has not always been seen in a positive light. The rising costs of the Medicare and Medicaid programmes have meant that health care has come to represent a larger share of the federal budget, limiting capacity for other government investments. Strain under the growing costs has caused many employers to switch from older forms of insurance, which were comprehensive, to plans with high deductibles for workers, shifting the financial burden onto individuals and families and leaving them vulnerable to big bills.

This downturn is clearly different, and the enormous reductions in the health workforce mean the recovery may be different, too. Some of the lost jobs in health care are likely to come back later. Cancer patients who postponed chemotherapy or people who cancelled their hip replacements will eventually want that care. But other changes may be permanent.

Over just a few weeks, there has been a shift to telemedicine visits, in which patients can talk with their doctors by video, telephone or even email. Those visits seem to be less profitable for doctors, and many health systems had long avoided setting up an infrastructure for them. But the new virtual visits have many advantages: Patients can avoid travel and waiting rooms, caregivers can easily participate and several doctors can talk to the same patient at once. There are no clipboards full of personal information to fill out by hand, and no person needed to retype the answers into a computer system before such visits.

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Other changes are more invisible. Hospitals have been forced to find small ways to digitise processes and share records that used to involve labour and bureaucracy. Bob Kocher, a partner at the venture capital firm Venrock, has been acting as an adviser to Governor Gavin Newsom of California through the crisis. He said he had seen hospitals adapt quickly to begin sharing their daily bed counts with one another and the state, for example, a task that used to involve hours of phone calls and faxes. Data about laboratory testing — how much is being done, how many patients have been found to have the coronavirus — has been similarly digitised in real time.

Are those sorts of on-the-fly tweaks enough to have an appreciable effect on long-term health care employment? Kocher thinks so, describing the recent cuts in health care administration as a “silver lining” of the crisis, while acknowledging the short-term pain of the job losses.

“I will passionately say that’s a good thing, because health care costs in America are high, and most of the health care cost in America is labour,” he said.

Another possibility is that the financial shock hitting smaller and less capitalised hospitals and physician practices could lead to a wave of consolidation as bigger competitors gobble them up for a discount. Those kinds of mergers have typically led to rising health costs, since bigger systems can demand higher prices from private health insurers. That could make the legacy of this shock a more expensive health system instead of a cheaper one.

“We have a great opportunity ahead of us, but I don’t see us making any progress,” said Amitabh Chandra, a health economist at Harvard, who once was a co-author of an essay describing health care as ‘recession-free’, and not in a good way. “I think we’ll go back to business as usual.”

Either way, health care is unlikely be the economic stabiliser it has been in the past. The loss of industry jobs on top of the major losses in other sectors are likely to make the recession deeper and the recovery slower.

c.2020 The New York Times Company
New York Times
first published: May 8, 2020 10:52 pm

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