When hospitals raise prices, local companies lay off workers to manage the cost of higher premiums, a new study from the National Bureau of Economic Research found.
Using data from large insurers, researchers looked at how hospital prices changed after 304 mergers between 2010 and 2015. To evaluate how rising healthcare prices affect the local economy, researchers then looked at filings with the Labor Department, including premiums for fully-insured employers and individual records on earnings and unemployment.
A few key findings from the report:
- For every 1% increase in healthcare prices, local employers' headcount decreases by about 0.4%. Meanwhile, payments for tax-funded unemployment insurance grew 2.5%. Employees earning between $20,000 and $100,000 a year were those most likely to face unemployment following hospital price increases.
"Employers that face increases in healthcare spending respond by laying off workers who they can no longer afford to retain," Zarek Brot-Goldberg, PhD, an author on the study and economist at the University of Chicago, told The Wall Street Journal.
- Local economies — which researchers defined as counties where merging hospitals are located and where workers live — where mergers gave hospitals market power dominance saw the sharpest increases in healthcare prices and unemployment.
- Every 1% increase in healthcare prices leads to a 1 per 100,000 population, or 2.7% increase in suicide and overdose deaths, according to the findings. "This implies that 1 in 140 individuals who become fully separated from the labor market after healthcare prices increase die from a suicide or overdose," the report said.
In response to the study, the American Hospital Association told the Journal that mergers create efficiencies, expand services and are often a way to prevent struggling hospitals from closing.
"The fact is, individual hospitals affiliated with a health system can bring a range of benefits for patients and communities," said Molly Smith, a policy executive at the AHA.