And as much as Obama Administration officials would love to take credit for this spending downturn, the real driver here is the consumer. Healthcare spending slowed dramatically during the recession, because people either lost their insurance coverage through layoffs, or they delayed elective procedures and other medical care because of the general economic uncertainty.
As we emerge from the recession, we find that the healthcare landscape has changed, thanks largely to the advent of the high-deductible health plan. As consumers shoulder most of the cost of their care through higher co-pays and deductibles it seems only logical that they will cut back on personal spending on healthcare goods and services, which CMS says account for about 85% of total national healthcare spending.
Facing these daunting external challenges, it makes perfect sense that providers are reluctant to hire more staff. Labor costs are the largest slice of providers' budgets so naturally that'd be the first place they'd look for reductions when margins tighten.
Two Job Healthcare Markets Emerging
Mergers and consolidations undoubtedly are playing a huge role in layoffs. Merge two hospitals or a physicians' group and suddenly a lot of administrators and support staff become redundant. And there is no indication that M&A activity will slow anytime soon as providers struggle for leverage with payers.