Employer-Sponsored Insurance, Health Care Cost Growth, and the Economic Performance of US Industries

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 We analyzed data from 38 U.S. industries for the period 1987-2005. All data are publicly available from various government agencies. Study Design We estimated bivariate and multivariate regressions. To develop the regression models, we 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). We 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. We 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.