Employer-sponsored Insurance, Health Care Cost Growth, and the Economic Performance of U.S. Industries

Published In: HSR, Health Services Research, v. 44, no. 5, pt. 1, Oct. 2009, p. 1449-1464

Posted on RAND.org on January 01, 2009

by Neeraj Sood, Arkadipta Ghosh, Jose J. Escarce

OBJECTIVE: To estimate the effect of growth in health care costs that outpaces gross domestic product (GDP) growth (excess growth in health care costs) on employment, gross output, and value added to GDP of U.S. industries. STUDY SETTING: The authors analyzed data from 38 U.S. industries for the period 1987-2005. All data are publicly available from various government agencies. STUDY DESIGN. The authors estimated bivariate and multivariate regressions. To develop the regression models, they assumed that rapid growth in health care costs has a larger effect on economic performance for industries where large percentages of workers receive employer-sponsored health insurance (ESI). The authors used the estimated regression coefficients to simulate economic outcomes under alternative scenarios of health care cost inflation. RESULTS. Faster growth in health care costs had greater adverse effects on economic outcomes for industries with larger percentages of workers who had ESI. The authors found that a 10 percent increase in excess growth in health care costs would have resulted in 120,803 fewer jobs, US$28,022 million in lost gross output, and US$14,082 million in lost value added in 2005. These declines represent 0.17 to 0.18 percent of employment, gross output, and value added in 2005. CONCLUSION. Excess growth in health care costs is adversely affecting the economic performance of U.S. industries.

This report is part of the RAND Corporation External publication series. Many RAND studies are published in peer-reviewed scholarly journals, as chapters in commercial books, or as documents published by other organizations.

Our mission to help improve policy and decisionmaking through research and analysis is enabled through our core values of quality and objectivity and our unwavering commitment to the highest level of integrity and ethical behavior. To help ensure our research and analysis are rigorous, objective, and nonpartisan, we subject our research publications to a robust and exacting quality-assurance process; avoid both the appearance and reality of financial and other conflicts of interest through staff training, project screening, and a policy of mandatory disclosure; and pursue transparency in our research engagements through our commitment to the open publication of our research findings and recommendations, disclosure of the source of funding of published research, and policies to ensure intellectual independence. For more information, visit www.rand.org/about/principles.

The RAND Corporation is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.