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Healthcare overhaul could save money and boost jobs, researchers say

In a report to be released today, Harvard and USC economists say legislation being considered would slow cost increases and free up money for companies to raise wages and hire more workers.

January 08, 2010|By Duke Helfand

National healthcare legislation in Congress could slow the growth of medical costs, allowing employers to create 250,000 to 400,000 new jobs a year over the next decade, economists from Harvard University and USC are predicting.

Wading into the hotly debated issue of whether the legislation is a job creator or a job killer, researchers from the two universities say that the reforms under consideration would slow the rate of cost increases and free up money for companies to raise wages and hire more workers.

Specifically, healthcare savings could be achieved through proposals for greater competition in insurance markets, better coordination of care and shrinking administrative expenses, they said in a report to be released today. With those changes, employers could then reallocate money now spent on ever-growing premiums to other business priorities.

"We could achieve huge productivity gains," said Harvard economist David Cutler, one of the study's authors and a senior fellow at the Center for American Progress, a liberal think tank.

But conservative economists and many business leaders contend that the proposed legislation would drive up costs by imposing billions of dollars in new taxes and penalties, killing jobs and hurting the economy as the financial burden of healthcare shifts to employers and workers.

One analysis from the conservative Heritage Foundation determined that higher taxes levied on the wealthiest Americans -- a proposal in the healthcare bill approved by the House in November -- would eliminate more than 450,000 jobs over the next decade.

The foundation and other critics of the healthcare overhaul say such taxes would have a particularly harmful effect on small businesses, which operate on smaller margins but have historically played key roles in renewing economic growth after recessions.

"If small businesses are not hiring, you'll have higher unemployment and slower wage growth," said Rea Hederman Jr., a senior policy analyst at the foundation.

Several California employers said they found the Harvard-USC study hard to believe, given that the average employer has paid double-digit annual increases in insurance premiums for several years and experienced other escalating business costs.

Santa Monica attorney Jeffrey Lee Costell, for one, says he will probably hold off hiring additional clerical workers if provisions remain in the healthcare legislation that require companies like his -- those with payrolls exceeding $500,000 -- to pick up the bulk of insurance premiums or face penalties.

"It's going to have a chilling effect," Costell said. "We're getting penalized because we are productive entrepreneurs."

Members of Congress are preparing to hash out a compromise between House and Senate healthcare bills. The measures would, among other things, require most Americans to have health insurance, expand coverage for the poor and stop insurers from denying coverage for preexisting conditions.

The bills also would impose billions of dollars in new taxes on the insurance industry, with the Senate bill including the "Cadillac tax" on more expensive healthcare plans.

The Harvard-USC report could be a boost for President Obama, who has made the economic benefits of health reform a top selling point in his administration's efforts to forge public support for the overhaul.

The president's Council of Economic Advisors said healthcare reform would increase domestic growth, raising family incomes substantially and leading to significant new hiring.

The Harvard-USC economists concluded that industries with high rates of employer-sponsored insurance -- including manufacturing, utilities and financial services -- would see some of the largest employment gains.

"If you have a strong bill that will promote control of healthcare costs, there will be an effect on the number of jobs," said Neeraj Sood, director of international programs at USC's Schaeffer Center for Health Policy and Economics.

How to achieve the savings remains a matter of heated debate in Congress and other quarters. Insurance industry executives maintain that reining in premiums without also addressing surging costs of hospitals and doctors will do little to stem medicine's drag on the economy.

"Unless you have the entire system reduce costs, you won't get premium relief," said Jay Gellert, chief executive of Woodland Hills-based Health Net Inc.

Relief can't come soon enough for San Francisco business owner Scott Hauge, who has seen health premiums for his 30-employee insurance brokerage rise 14% annually over the last seven years.

Hauge, president of advocacy group Small Business California, said he didn't expect much relief from Congress -- at best a slowdown in his costs, as the Harvard-USC economists predict. He said he might use any savings to replace computers, to pay employee bonuses or perhaps to help pick up insurance costs.

He is closely watching the legislation in Congress but can't get any firm sense of how the healthcare overhaul would affect his bottom line.

"There are a whole lot of unknowns out there right now," he said.

duke.helfand@latimes.com

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