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The prevalence of employer-sponsored health insurance in the United States creates a link between what happens in health care markets and wages and employment at firms outside the health care sector.
"A 1% increase in health care prices caused by a hospital merger lowers both payroll and the number of employees at firms outside the health sector by approximately 0.4%," according to a new study by the Washington Center for Equitable Growth. At the county level, a 1% increase in prices:
- Reduces per capita labor income by 0.27%;
- Increases flows into unemployment by approximately 0.1 percentage points;
- Lowers federal income tax receipts by 0.4%; and
- Increases unemployment Insurance payments by 2.5%.
"In short, we find that hospital mergers that lead to price increases cause middle-income workers outside the health care sector to lose their jobs," researchers said. "Our estimates also allow us to scale the effect of individual hospital mergers on local economies. We show, for example, that a hospital merger that raised prices by 5% would result in $32 million in lost wages, 203 job losses and a $6.8 million reduction in federal tax revenue."
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