Rising Healthcare Costs and Low Wages Pose Obstacles for N.J. Economy

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New Jersey has finally recovered the jobs that were lost during the “great recession” of 2007-  2009 according to the Bureau of Labor Statistics latest report released on January 11th.

But the report also shows a jobs market that is skewed toward growth in lower paying jobs.

As jobs in the state decreased by 11,400 jobs since December, the largest gains in employment continue to come from the leisure and hospitality industry, which made up almost 40 percent of New Jersey’s new jobs.

Job growth has occurred in all of New Jersey’s largest 15 counties from the fourth quarter of 2015 to the fourth quarter of 2016.  However, in each of these counties, wages have gone down, according to the Bureau’s Employment and Wages Report.

Some commentators, including John Sarno, president of the Employers Association of New jersey, are concerned that the state is too tilted toward an economy of low wages, decreased investment, and an underutilization of human capital.

"You get very poor productivity when you can coast on the fumes of just hiring cheap labor," he says.

The 2015 Census survey reports that the inflation-adjusted median household income in the state was $72,093, about $3,700 less, or nearly 5 percent lower, than its equivalent in the 2010 survey.

And rising healthcare costs continue to take a bigger bite out worker paychecks and business profits.

A majority of New Jerseyans think their health insurance premiums are too high, but are overall satisfied with the quality of care they are receiving, according to a survey conducted by the  N.J. Health Care Quality Institute and the Eagleton Center for Public Interest Polling at Rutgers University-New Brunswick.

Sarno says that the prevalence of high deductible plans offered by small businesses increases costs for workers.

Eight out of ten New Jerseyans work for a small employer, with about 1,400,000 employed by an employer with 50 employees or less. As in most states, the smaller the employer, the higher the health care premium.

At the same time, healthcare spending continues to go up. This week’s report by the Health Care Cost Institute, an independent research firm funded by foundations and big employers, shows steadily increasing prices for many health care services between 2012 and 2016, including:

•    a 25 percent increase in prescription drugs while there use grew a modest 1.8 percent.
•    a 30 percent increase in emergency room services, while visits increased just 2 percent, and
•    a 30 percent increase in inpatient surgeries - about $10,000 more per surgery – while surgeries dropped by 16 percent.

Sarno views stagnant wages and increase health costs as an ominous trend in the state, as hospitals and providers increase prices, forcing employers to pay more, shifting those costs onto workers in lower wages and higher deducible.  

Yet in the present uncertain political environment it is not clear whether policy makers and regulators have the tools to help.  

“Wages and healthcare are usually siloed by researchers and policy makers. But the issues are inextricably linked.  But government agencies rarely even exchange information” he says.  

Moderating these increases was something that the Affordable Care act was supposed to do long term. But we'll never know now whether it could have worked as it gets dismantled at the federal level, he says.

At the same time, states like Arizona are considering allowing residents to buy into Medicaid, a public option of sorts, which allows low wage workers to purchase managed are plans.  

According to a July 2014 report from The Pew Charitable Trusts, in 2010 there were 1,055,940 New Jersey residents enrolled in Medicaid. By 2013, Medicaid covered 13 percent of New Jersey residents; between 2000 and 2012, this figure had increased by 1.8 percentage points.

"It’s something that can’t be ruled out” says Sarno.

Last week, Oregon voters strongly backed a ballot initiative raising taxes on insurers and hospitals to help pay for the state's Medicaid program.

More than 60 percent of voters supported the referendum, which is expected to raise up to $320 million over the next two years.