Healthcare Business News
Richard Umbdenstock, president and CEO of the AHA

Healthcare groups say sequester threatens 766,000 jobs

By Jessica Zigmond
Posted: September 12, 2012 - 1:15 pm ET

The looming 2% sequester of Medicare spending to reduce the federal deficit could result in 766,000 fewer healthcare and related jobs by 2021, according to an economic analysis from three healthcare interest groups (PDF).

Beginning in January, the Medicare program will face a 2% cut in spending from 2013 to 2021 due to the sequestration process that the Budget Control Act of 2011 established if a congressional committee failed to identify $1.2 trillion in spending reductions during that period. The new findings from the American Hospital Association, the American Medical Association and the American Nurses Association show how those spending cuts will lead to the loss of direct healthcare jobs, and how those losses will lead to fewer jobs in other industries as healthcare organizations and their employees spend less in other businesses.

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The report categorizes the job losses as those having a direct effect on healthcare; those having an indirect effect, which reflects the impact of local industries buying goods and services from other industries; and those having an induced effect, which relates to the jobs lost when workers don't re-spend their income. In 2013 alone, the report estimates 496,431 fewer direct-effect jobs, 88,453 fewer indirect-effect jobs and 196,222 induced-effect jobs.

“The healthcare sector has long been an economic mainstay in our communities,” said Richard Umbdenstock, president and CEO of the AHA, at a news conference in Washington. “It has provided stability and growth even during times of recession. The U.S. Bureau of Labor Statistics shows healthcare created 169,800 jobs in the first half of 2012 and accounted for 1 out of every 5 new jobs created this year,” Umbdenstock said, adding that hospitals are the largest component of the healthcare sector, as they employ about 5 million people and rank second only to the restaurant industry as the top source of private sector jobs in the U.S.

Dr. Jeremy Lazarus, president of the AMA, emphasized how the sequestration will affect access to patient care, especially as the nation's physicians also face a 27% reduction in Medicare payments starting in January. The AMA and other physician groups sent letters to House(PDF) and Senate (PDF) leaders that asked lawmakers to nullify both the sequestration and the sustainable growth-rate formula cuts.

In conjunction with the report, the three organizations will run an ad to fight the Medicare cuts in Washington publications this week and next. The study and ad campaign follow a report last week from the Institute of Medicine that identified waste in the healthcare system.

“Straight cuts are not the way to try to reform a system,” Umbdenstock said when asked if the Medicare payment cuts would help the healthcare system become more efficient. “Cuts are not reform. Ratcheting is not reform. Let's improve our way to where we need to get to, and let's all play a part in that,” he said, adding, “A straight across-the-board 2% reduction on every check they send out is hardly the way to try to take on the challenge that we face.”

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