By Ben Smith
Editor’s note: Ben Smith is an emergency physician and medical director of the emergency department at Central Vermont Medical Center in Berlin.
American health care is in crisis. On NPR (“On Point,” Nov. 29) an ICU nurse recently said that anyone would leave the field if they were paid the same wage the nurse was receiving. The burdens were simply too great, the support too little.
An analyst observed that 20% of the workforce actually had left, or was considering it, and the host said: “That sounds like an industry on the verge of collapse.” Survey data from the American Hospital Association and the Washington Post/Kaiser Family Foundation confirm these numbers and these sentiments.
As an emergency doctor and a longtime observer of how policy decisions play out on the front line, I can say that although the nurse’s statement may be hyperbolic — not everyone in health care is looking for the exit, and so many of us remain dedicated to our work — the despair in her words rings absolutely true, and should ring alarm bells at the highest levels.
American health care is in an existential crisis — a crisis that began long before the pandemic — and the policy decisions we make now will determine whether our communities continue to have access to the health care they deserve.
This is not only Covid’s fault. For a generation, we have labored under a policy narrative that describes an industry run amok — of costs that are somehow aberrant. This narrative has been applied indiscriminately, including to hospital budgets and the workforce — despite the obvious paradox that, with people living longer lives, and the population aging, of course we would need more people, paid a sustainable wage.
Core to this policy narrative is an assumption that health care costs should conform roughly to the rate of inflation. Vast amounts of energy have been expended on this assumption, and many blunt policy instruments stem from it, such as caps on Medicare reimbursement (sequestration, portions of the Affordable Care Act,) the cost containment directive of the Green Mountain Care Board, the Triple Aim of health care reform, and most recently the terrifying idea of “cost growth benchmarks” floated to Vermont’s joint task force on affordable, accessible health care.
These policy instruments, taken in total, have directly compromised the ability of health systems to staff safely and appropriately. At this critical juncture — with institutions teetering, good people fleeing the profession, patients stacking up in emergency departments, suffering families unable to get timely appointments, rural hospitals failing, mental health parity a distant dream, and outcomes at the bottom of the list of developed nations — it’s time for a reappraisal. It’s time for a new story.
In the 1960s, the Yale economist William Baumol observed that there are different types of labor in our economy: those whose productivity can be increased, such as factory workers and retailers, and those who provide a service that is fundamentally incompressible, such as nurses, teachers or baseball players.
As productivity increases in one sector — say, manufacturing — wages also increase. At that point, the (so-called) nonproductive industries, like education and health care, must increase wages to compete. But without the concomitant productivity gains, the cost of those industries rises at an escalating rate.
This phenomenon — of disproportionate, supra-inflationary cost increases in certain industries — is called Baumol’s cost disease. It suggests that increasing costs in human-centered industries such as health care, education and public safety may not be abnormal, or even unexpected, but might actually be the natural effect of how markets value different types of work.
The encouraging side of Baumol’s argument is that, contrary to popular wisdom, the situation is entirely affordable, as long as the other parts of the economy continue their productivity growth. Inflation, after all, is an average, not some kind of natural law.
He argues that the challenge is actually political, rather than economic: Our leaders need to understand this phenomenon, explain it, and develop funding mechanisms that acknowledge its reality. In a nutshell, we have a political problem, not an affordability problem. We get what we pay for.
We need a new story. The pandemic has unmasked glaring flaws in our dominant policy narrative, and it is abundantly clear that costs can no longer be balanced on the backs of the front-line labor force.
Policy solutions like cost growth benchmarks carry inherent assumptions that are flat-out dangerous, and we are living with the consequences right now. But, as Baumol suggests, there is another way. If we want resilient and accessible health care systems, we need to accept supra-inflationary increases in labor costs as both normal and affordable.
To the extent we need to control costs — and it is undeniable that Americans pay more for health care than other countries, although rates of increase are similar — we need to look away from the front-line.
We need to look away from the hospitals and clinics that keep the lights on, day and night, for all of us. We need to accept that people need living wages to do this difficult, human work. Work that can’t be outsourced. Work that must be done if we are to have a stable, resilient and future-oriented society.
