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The Health Care Conundrum: Cut Costs Or Create Jobs?

Governors are in a conundrum. How can their states toe the line on spending for vital health care services without killing the health care job creation engine?

The Health Care Conundrum: Cut Costs Or Create Jobs?

President Obama will address the nation tonight on the vital topic of how to create more jobs in America. I can’t help thinking that politicians on both sides of the aisle face a stark choice when it comes to jobs versus rising health care costs.

Health care has been a reliable job creator during the recession. In most towns in rural America, the local hospital is likely one of the largest employers. According to Healthcare Finance News, "Over the past 12 months, the healthcare industry has added 299,000 jobs." Given that the economy managed to add a total of zero jobs last month, that's an impressive gain.

At the same time, it seems a foregone conclusion that the next round of spending cuts dictated by Congress will include health care programs like Medicare and Medicaid. As Reed Abelson pointed out in this New York Times story, reductions in funding for such large and foundational programs will likely cause the industry to slow hiring. As proof, Abelson notes a study from the business research group Conference Board that reported want ads for health care providers and technicians falling by 61,200 listings in July.

So governors are in a conundrum. How can their states toe the line on spending for vital health care services without killing the health care job creation engine?

In my view, part of the answer lies in educating consumers about costs and helping them make more informed choices about how to purchase health care. In our system today, health care users typically are not the ones who pay for their care, so the norm is to shield consumers from information about costs. And because health care is paid for with "other people’s money," some argue that it creates a situation in which health care services are consumed voraciously without regard for cost. By preventing that, it could free up money that the health care industry could used for hiring, despite state cuts.

One important development in empowering consumers are new regulations proposed by the Obama administration that would require all private health insurance plans to produce summaries of coverage for consumers in a standardized format, making it easier to compare plans side by side. The summaries, which have been compared to nutrition labels on foods, would provide details of what each plan covers in an easy-to-read format. They would also include estimates of what common medical scenarios would cost under each plan. Examples include having a baby, treating breast cancer, and managing diabetes. A copy of the proposed plan comparison format is available here (PDF).

Standardized plan information would be a welcome development in empowering consumers to more actively participate in controlling health care costs. Many seniors already know how beneficial this can be, because Medicare requires private insurers to present Medicare supplemental plans in a standardized format so they are easy to understand and seniors can compare them side by side. When the coverage details of every private Medicare supplemental plan are made transparent, it forces insurance companies to keep prices competitive.

I believe we are at the dawn of an era of consumerism in health care. Empowered consumers foster good old-fashioned American free market competition. And that keeps quality levels up, costs down and creates jobs—something every political candidate would like to have on their resume.

[Image: Flickr user ReSurge International]

Bryce Williams is the President and CEO of Extend Health. Mr. Williams holds a J.D. degree from
George Washington University and a B.A. from Baylor University.