A June 2024 working paper from the National Bureau of Economic Research examined the effects of rising healthcare prices on labor costs. The authors note that since 2000, prices in the hospital sector increased faster than prices in any other sector of the economy without reflecting improvements in quality. “Rising health care prices increase health spending and are passed on to employers via higher [employer-sponsored health insurance] premiums. In turn, these higher premiums decrease labor demand, lowering employment.”
Specifically:
- A 1% increase in health care prices lowers both payroll and employment at firms outside the health sector by approximately 0.4%.
- At the county level, a 1% increase in health care prices reduces per capita labor income by 0.27%, increases flows into unemployment by approximately 0.1 percentage points (1%), lowers federal income tax receipts by 0.4%, and increases unemployment insurance payments by 2.5%.
- A 1% increase in health care prices leads to a 1 per 100,000 population (2.7%) increase in deaths from suicides and overdoses.
The full working paper is available here.