Congressional Newsletter
Monthly updates to Congress on RAND's work in health policy

Rapid Growth in Health Care Costs Hurts Some U.S. Industries

money chart

For the past two decades, growth in U.S. health care costs has outpaced growth in gross domestic product (GDP). How do sharply rising health care costs affect the U.S. economy? In the first study to examine this issue directly, RAND researchers found that rapid growth in U.S. health care costs leads to job losses and reduced output among industrial sectors that commonly provide workers with health insurance. Researchers examined the economic performance of 38 industries from 1987 through 2005 and compared changes in employment and gross economic output for industries in which a large number of workers have employer-sponsored health insurance to in which few workers have job-based health insurance. After adjusting for other factors, including underlying industry-specific economic trends, the researchers found that industries in which a larger percentage of workers received employer-sponsored health insurance (such as manufacturing and transportation) had significantly lower employment growth and lower output than industries (including some service sectors, such as retail sales) in which health benefits were less common.

The study's findings imply that the rapid rise in health care costs has a measurable impact on many industries, shifting economic growth and employment away from industries that provide health insurance to their workers and toward industries that do not. Although the effects of rising health care costs on overall economic growth and total employment are difficult to quantify, the distributional impact on patterns of growth across industries is substantial.

Read the Research Brief >>


A briefing on this study will take place on August 24, 2009, at 1 p.m. in 210 Cannon, as part of RAND's Health Care Costs Series. Author and senior economist Neeraj Sood will present findings and be available to answer questions. Watch for an email invitation with additional information.

Higher Prescription Copays Discourage the Newly Diagnosed Chronically Ill from Starting Drug Treatment

buying a prescription at a pharmacy

Past research has shown that increases in prescription cost-sharing can discourage some patients from using medication. The chronically ill, in particular, have been found to be sensitive to out-of-pocket costs and face potentially serious health consequences from interruptions in drug therapy. However, there is still a limited understanding of how patients actually reduce their prescription use and the characteristics of patients who may be most affected. In a recent RAND study, researchers examined the impact of higher out-of-pocket costs on patients who are beginning drug treatment after being diagnosed with a chronic illness. The study included more than 200,000 retirees who received health coverage from former employers from 1997 to 2002 and focused on 17,183 people from this group who were newly diagnosed with diabetes, high blood pressure, or high cholesterol.

The study found that, for each of these conditions, patients who were newly diagnosed were more likely to delay beginning recommended drug treatment if they faced higher prescription copayments. For example, among those newly diagnosed with high blood pressure, the percentage starting recommended drug treatment within a year of diagnosis dropped from 55 percent to 40 percent when the copayment doubled. Similar differences were seen among those newly diagnosed with diabetes and high cholesterol. The study also showed that patients who had no experience with medications were even less likely to begin recommended drug treatment.

These results have implications for policymakers and physicians, both of whom need to consider the effects of benefit design on patient behavior in order to encourage the use of needed medications. In addition, the study results highlight for physicians the types of patients who may be most likely to ignore recommended drug treatments.


REMINDER: Briefing TODAY on Options for Controlling Health Care Spending in Massachusetts

RAND economist Christine Eibner will be presenting findings from a recent analysis of options for reducing health care spending in Massachusetts. Rising health care costs threaten to make the universal coverage initiative passed in 2006 unsustainable. The lessons learned in this study are broadly applicable and could help Congress navigate cost-containment proposals in the health reform debate.

TODAY, August 17, 2009
1:00 p.m.–2:00 p.m.
210 Cannon House Building



Neeraj Sood

Neeraj Sood

Neeraj Sood is a senior economist at RAND, a professor at the Pardee RAND Graduate School, and a faculty research fellow at the National Bureau of Economic Research (NBER). His previous research focused on the economics of innovation, HIV/AIDS policy, and health care financing. Currently, Sood's work focuses on health economics and health policy research, with an emphasis on the role of price regulation in health and life insurance markets, the effects of provider reimbursement on resource use and outcomes, and the impact of health insurance markets on the HIV and obesity epidemics.

Read more work by Mr. Sood »


Lindsey Kozberg
Vice President, Office of External Affairs

Shirley Ruhe
Director, Office of Congressional Relations

Kristy Anderson
Health Legislative Analyst

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