Sequestration Will Be Costly to Healthcare Workforce

September 17, 2012 - The pending 2 percent sequester of Medicare spending mandated by the Budget Control Act of 2011 will cause the loss of hundreds of thousands of healthcare jobs, according to a new report released by the American Hospital Association (AHA), the American Medical Association (AMA) and the American Nurses Association (ANA).

“Hospitals’ ability to maintain the kind of access to services that their communities need is threatened,” said AHA President and CEO Rich Umbdenstock, during a press conference. “Cuts to hospital services could create devastating job losses in communities and the hospitals they reply upon.”

On behalf of the three associations, representing more than 5,000 hospitals, the majority of the country’s physicians and 3 million nurses, Tripp Umbach, a Pittsburgh, Pennsylvania-healthcare consulting firm specializing in economic impact studies, measured the anticipated effect of sequestration’s Medicare payment cuts on healthcare providers and related industries.

Sequestration and Healthcare
Rich Umbdenstock; Cindy R. Balkstra, MS, RN, CNS-BC; and Jeremy A. Lazarus, MD, discuss the job losses healthcare will face as a result of sequestration.

The firm estimates the annual reduction in funds would be $10.7 billion in 2013, which is close to the U.S. Office of Management and Budget estimates of an $11 billion Medicare reduction.

Tripp Umbach found more than 211,756 direct healthcare jobs will likely be lost during 2013, as a direct result of the cuts; and by 2021, the direct negative employment impact is estimated to be 330,127 jobs. All together, due to the multiplier effect of spending by healthcare organizations and their employees, the report estimates the cuts will translate into 496,431 fewer jobs in 2013 and 766,808 fewer jobs by 2021.

Healthcare represents 18 percent of the U.S. economy and has been one of the bright spots for job creation, adding 169,800 jobs in the first half of 2012 and accounting for one out of every five new jobs created this year. But that won’t last if sequestration remains the law of the land.

“Common sense tells you this is not a good time to take a hatchet to healthcare, which saves American lives and puts Americans to work,” said AMA President Jeremy A. Lazarus, MD.

California will be hardest hit, losing 50,785 direct healthcare jobs in 2013 and 78,444 by 2021, followed by Florida, which is projected to lose 35,827 in 2013 and 55,340 by 2021, and Texas with a 32,172 drop in 2013 and a 49,695 loss by 2021. The authors did not investigate which healthcare workers would lose their jobs but concluded that the jobs will be difficult for the country to replace.

Hospitals will shed the most workers by 2021, 144,006, followed by nursing and residential care facilities at 63,946, health practitioner offices at 61,809, medical and diagnostic laboratories and other ambulatory service providers at 56,527, and home health care at 39,143.

ANA First Vice President Cindy R. Balkstra, MS, RN, CNS-BC, added that the sequestration cuts would have a devastating effect on nurses and patients.

Sequestration and Healthcare
Cindy R. Balkstra, MS, RN, CNS-BC, said sequestration cuts would have a devastating effect on patients and nurses.

“Cutting nursing jobs lessens the quality of care and could place patients at risk, and that should be unacceptable to everyone,” Balkstra said.

Combined with the 27 percent cuts to physician Medicare reimbursement looming due to the sustainable growth rate (SGR) provisions, Lazarus said the additional 2 percent reduction will hurt patient access to care and add uncertainty into the healthcare system. Patients covered by Medicare often have difficulty finding a physician, he said.

“As we look to build the healthcare system of the future that focuses more on keeping people healthy and coordinating their care, physician practices must invest in technology, in hiring new staff and in training for current staff,” Lazarus said. “The impending sequester, paired with more than a decade of essentially flat Medicare payments, denies practices the resources they need to make these investments.”

The AMA and an array of physician specialty organizations sent a letter to Congress requesting bipartisan support for passage of legislation to nullify the Medicare physician payment cuts called for under the sequestration provision and the SGR formula.

According to a report from the Office of Management and Budget, President Obama has proposed ways to avoid the arbitrary cuts on two occasions, including the President’s Plan for Economic Growth and Deficit Reduction and the fiscal year 2013 budget, but Congress needs to act.

“It is our hope members of Congress, from both sides of the aisle, will use a balanced approach to address this looming disaster before it’s too late,” Balkstra agreed.