Healthcare Watch: Cost Growth Is Decreasing, But Employment Growth Remains Steady

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Tyler Cowen directs our attention to the chart on the right. It shows that the growth of healthcare costs is indeed slowing down, but the growth of healthcare employment has been rock steady. How can this be?

There are a few theories. Maybe only lower-paying jobs are growing. Or perhaps wages are falling. Or maybe hours are being cut back. Apparently, though, none of those things seems to be true. “Economists still have more questions than answers,” says Dan Diamond of The Advisory Board Company.

For what it’s worth, I think the correct metric is per-capita health expenditures, and on this measure employment has been growing at about 1 percent per year, while overall costs have been growing at about 3 percent per year in recent years. This is a little easier to believe, since it puts a lower floor on things. If we’re being a bit more careful about diagnostic tests and generic drugs and end-of-life treatment, it’s not hard to see how these trends could converge over time.


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