Obamacare's Perverse Job Creation Program

The latest jobs report gave the stock market a boost and injected some optimism into public sentiment about our economic prospects. Unfortunately there’s a problem with the current employment situation that few understand: Obamacare has likely led to too many jobs in health care, drawing labor from more productive functions.

Dan Diamond of Politico reports jobs in health care have grown 23 percent since 2005, while jobs overall have grown only 6 percent. Much of this was driven by the collapse of non-health jobs in 2008-2010, while health jobs remained undisturbed. As the economy recovered, Obamacare kept layering jobs onto health care that did not actually improve health care:

“We knew our economy spends more than it should on health care," says Bob Kocher, a venture capitalist who served as a special assistant to the president in 2009 and 2010 and helped shape the Affordable Care Act. “And we had good battles inside the White House" over whether to preserve health jobs — which were one of the biggest drivers of those costs, but kept Americans employed at a bleak economic time.

The resulting law — born at the very moment the economy was bottoming out — ultimately came down on the side of saving jobs. Many of those jobs are effectively waste. "For every doctor, there are now 16 FTEs that are non-doctors," Kocher said. "Nine of them are administrators — and it's jumped from six" in the past few years. 

(Dan Diamond, “Obamacare, the secret jobs program,” Politico, July 13, 2016.)

The article emphasizes cutting health costs will be difficult if more and more people are employed in health care. I would challenge that. If those jobs are in billing and administration, with relatively low incomes but good job security, they can be expanded while cutting health spending by imposing government policies that harm innovation. Price controls on prescription drugs or regulation impeding the adoption of labor-saving information technology (e.g. remote monitoring of patients at home) would be examples of such policies.

Let’s put it this way: If the federal government had controlled farming two hundred years ago the way it controls health care today, it would have sought to preserve all farming jobs. Today, 72 percent of the population might still be farming (instead of two percent). Just think of all the markets that would never have arisen.