High health costs prop up N.J. economy

Economist: Garden State’s small businesses better than U.S. average in offering insurance to workers.The high cost of health coverage is a heavy burden on the employers, workers and families who pay these escalating premiums, but the money also supports a huge chunk of economic activity and jobs in New Jersey.

Joel Cantor, director of the Center for State Health Policy at Rutgers University, spoke Thursday on the state’s health care economy at the Rutgers Economic Advisory Service seminar at the Rutgers Bloustein School of Planning and Public Policy, in New Brunswick.

“Every dollar spent in the health care system is a cost to somebody — but it is also income to somebody,” Cantor said.

New Jersey is a high-cost state, which contributes to high health care spending: New Jersey has nearly the highest per-capita Medicare spending in the nation, Cantor said.

Employers are coping with rising health insurance premiums by increasing co-pays and deductibles, and passing more of the premium costs on their workers. But New Jersey also ranks very high when it comes to the percentage of employers who offer health coverage to their workers, Cantor said — even the rate at which businesses with fewer than 10 employees offer insurance “is much higher than the national average.”

In 2008, more than 50 percent of employers with 10 or fewer workers offered health coverage, compared with the national average of less than 40 percent for companies of that size — a reflection of New Jersey’s higher incomes. “Those high-wage jobs come with the demand for benefits,” Cantor said.

In 2004, the most recent year for which figures are available, about 11.8 percent of the state’s gross domestic product went into the production of health care goods and services, Cantor said, which was less than the 13.3 percent share for the nation. That’s because a significant amount of New Jersey’s health care dollars are spent in neighboring states, so while spending is very high in New Jersey, not all of that money stays here.

“New Jersey doesn’t necessarily benefit from the largesse of our excessive health care spending as much as we might,” he said, “and our neighboring states benefit.”

Cantor said he sees no sign that rising health care costs will abate, “although the burden on businesses and families will continue to grow.” The unknown factor is Congressional healthcare reform, and Cantor said in reviewing the House and Senate versions of health care legislation, he sees nothing that “will bend this cost curve and reduce the cost pressure that we see.” So health care will continue to generate spending, economic activity and jobs in New Jersey — while continuing to be a cost burden for many people in the state, he said.

E-mail Beth Fitzgerald at [email protected]