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Medicare Cuts Threaten 766K Healthcare Jobs, Groups Say

 |  By John Commins  
   September 13, 2012

As many as 766,000 healthcare and related jobs could be lost by 2021 with the 2% sequester of Medicare spending that goes into effect Jan. 1, the nation's leading healthcare professional associations said in a joint warning on Wednesday.

The American Medical Association, the American Hospital Association, and the American Nurses Association issued a report Wednesday morning detailing the state-by-state impact of the sequestration as part of their coordinated effort to urge Congress to fix the problem. 

"The 2% cut would have such a profound impact on jobs in the healthcare sector," AMA President Jeremy A. Lazarus, MD, told HealthLeaders Media. "It has a tremendous economic impact and a tremendous patient care impact. The AMA, the AHA and the ANA coming together to express our deep concern indicates that this is a high priority for us."

Lazarus says the AMA and scores of professional medical associations and societies are already battling with Congress to stave off the looming 27% Medicare physician payment cut, which also takes effect on Jan. 1 under the sustainable growth rate funding formula.

 

"We are coupling our concern with the yearly issue of the potential 27% cut in the sustainable growth rate," he says. "This adds another level of uncertainty for physicians so we want them to know about it and what we are doing on it."

Caroline Steinberg, vice president for trends analysis with the American Hospital Association, says the jobs report demonstrates the importance of the healthcare sector to the economic well-being of the nation. The report estimates that nearly 500,000 jobs will be lost in the first year of the sequester.

"Few people really recognize the impact of healthcare on the economy," Steinberg says. "Healthcare is really an economic mainstay and healthcare job growth has remained strong throughout the economic downturn. It's a message that people need to hear what is often missed in the larger debate."

"With healthcare services the spending often stays in the community," Steinberg says. "When you spend a dollar on healthcare, 60% of that dollar is going to go to creating jobs at that hospital in the community. If you spend a dollar a Wal-mart a lot of that money is going to go to China because a lot of the products are made in other countries. That is why healthcare has a pretty high multiplier relative to other industries."

She says that multiplier effect could also work in reverse for thousands of hospitals and the communities they serve across the nation if the cuts go through.

"When you cut Medicare funding Medicare hospitals will have less reimbursements coming in. They will have to lower their expenses and some of that will be through staff reductions. That is the direct effect," Steinberg says. "And part of that direct effect is that hospitals will reduce spending on other supplies and services."

"The indirect effect would be when the hospitals reduce their spending on other supplies and services and other businesses are affected," she says. "If a hospital reduces spending on laundry or food service or medical devices or drugs those companies will in turn have to reduce their expenditures, which could result in staff layoffs."

Finally, Steinberg says, there is the "induced effect" of the loss of revenue for people who've lost their jobs either at a hospital, or supplier. "They are then going to reduce their purchases in their community, which will cause additional business, restaurants, clothing stores, car dealerships, to have less revenue coming in, which will lead to more job losses," she says.

The cuts were mandated by the Budget Control Act of 2011 as part of an agreement to raise the debt ceiling after a bipartisan "Super Committee" failed to negotiate a balanced budget deal. If a new deal can't be hammered out by Jan. 1, cuts totaling $1.2 trillion will kick in automatically against military and domestic programs.

Congress will take up the issue again after the November general election. Several Congressional leaders from both parties said this week that they anticipate a successful resolution, but House Speaker John Boehner, (R-OH) told reporters that he is "not confident at all" that a deal would be finalized.

The healthcare sector has been one of the few bright spots for job growth over the last decade and through the Great Recession. In August, healthcare created 16,700 new jobs, 17.3% of the 96,000 new jobs in the overall economy for the month.

So far this year, healthcare has created 197,300 jobs, nearly 18% of the 1.1 million jobs created by the overall economy. Since January 2008 healthcare has created 1.2 million jobs in an economy that has otherwise seen a net loss of 4.7 million jobs over the same period. 

 

John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.

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