Health-care jobs have contributed to Alaska's economic growth for more than a decade, but reining in that growth may be crucial to keeping the rest of the state's businesses and governments prospering.
"Health care costs are eating the state's lunch," said Dr. Ward Hurlburt, the state's chief medical officer.
Hurlburt's view is one heard across state government, where the cost of providing health care to state employees and retirees has soared over the last decade. From 2001 to 2010, the state of Alaska's health-care bill more than doubled, rising annually at 9.4 percent per year. Where Alaska had been spending $856 million for health care in 2001, it was spending $1.9 billion in 2010.
Businesses and municipal governments express similar concerns.
And while Gov. Sean Parnell has steadily voiced opposition to federal health-care reform, his administration is joining with businesses seeking other ways to stem costs. The Alaska Health Care Commission, chaired by Hurlburt, is spearheading that effort.
Medical tourism booming?
Perhaps the most controversial option for limiting costs is sending Alaska workers out of state for cheaper care, a strategy that could pressure local health providers to lower their prices. The strategy, known as "medical tourism," has Alaska hospitals concerned.
It's not clear how much cost-driven medical tourism is already going on, but Hurlburt said an Alaska business reported that a procedure needed by one of its employees cost $11,000 in Alaska but only $2,600 down south.
That's the kind of savings the state is seeking as it considers expanding medical-tourism incentives by offering to pay for employees' hotels and companion tickets when they go out of state for cheaper medical care.
That could put those paying for health care in conflict with Alaska hospitals and other providers, which are mostly nonprofits or municipally owned facilities, said Karen Perdue, CEO of the Alaska State Hospital and Nursing Home Association.
Lowest health costs in U.S.?
Perdue acknowledged that medical costs in Alaska were sometimes high, but she doubted that any push for medical tourism would bring hoped-for gains. "There is some room for improvement," she acknowledged. "There is always room for improvement in medical fees, there are physicians who are outliers who probably should take a look at their cost structure. But the ultimate problem we have in Alaska is the problem with small numbers, with critical mass," she said.
Alaska can't benefit from the economies of scale larger states tap into, but it still needs to make the most up-to-date technology available, she said, because most residents can't readily travel to other states for services.
Although the commission Hurlburt chairs has a goal of having the nation's lowest per-person health-care costs, Perdue doubted that was possible. "Do we have the lowest transportation cost, the lowest education cost, the lowest labor cost?" she asked. Health Care Commission Executive Director Deborah Erickson acknowledged that goal was "not necessarily achievable, but something to reach for." (Check a Q&A with Erickson here.)
Getting even part of the way there is likely to mean expansion of medical tourism, but other less controversial measures are under consideration across the state, too.
Those include greater use of preferred-provider networks, requiring employees to pay a bigger share of their health-care costs in an effort to force them to be cost-conscious consumers, and attempts to teach employees healthier behaviors so they'll use fewer costly services.
17% a year hike
NANA Management Services' Dean Rampy told the Health Care Commission last month that his company's cost-containment efforts have failed, and the company has been hit with years of cost increases averaging 17 percent a year.
"We tried to cost shifting, putting more of the burden on the employee, trying to encourage them to step up to a higher deductible plan," Rampy said. "It didn't work."
Even if the state can lower the per-person cost of health care, an aging population is certain to require more services over the next decade. The Department of Labor and Workforce Development's Research and Analysis Section, which documented the boom in health-care jobs over the last decade predicts more of the same for the current decade. Labor economists are predicting that by 2020 the health care sector will provide 15 percent of the state's jobs, up from 12.8 percent in 2010.
"Looking at the next decade, we've got the baby boomers' retirements," that will drive up health-care spending, said state labor economist Dan Robinson. "That's happening nationwide, but it's going to be more extreme here."
More elderly Alaskans?
The last U.S. Census showed Alaska with only 7.7 percent of its population aged 65 and over, the lowest in the nation. The national average was 13 percent, and Florida topped the list at 17.3 percent.
Alaska's older population is expected to increase; the state has been encouraging retirees to remain as a way of broadening the economy.
That's one of the factors that will lead to growth in health-care jobs, even in the face of efforts to cut back, economists said.
While the growth in health-care jobs should eventually level off, Robinson said, it's difficult to predict when that may happen. "As long as I've been here, I've expected health care growth to run its course, but it hasn't," Robinson said.
He's stopped predicting when it might.
But health care job growth helped power the state through the recent nationwide recession, making up for losses in other sectors of the economy, Robinson added.
The important thing, Hurlburt emphasized, is for Alaska to get health-care costs under control before they damage the state, and he thinks the best way to do that is for providers lead the efforts.
"We don't want to have blood in the streets," he said.