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Measuring fallout: study sees silver lining in health care reform.

A HEALTH CARE REFORM plan may be good medicine for the nation's job growth despite its initial drag on disposable personal income, according to preliminary findings of a study by two Arkansas researchers.

The study showed that after the first full year in place--which the researchers took to be 1996--a reform plan would create 190,000 jobs nationwide, increasing to 378,000 the following year.

Ron Hy of the University of Arkansas at Little Rock Institute of Government and Richard Sims, administrator of the Bureau of Legislative Research Office of Tax Research, used a policy simulation computer model to analyze the economic impact of one possible version of a Clinton reform plan.

They based their study on information that has come out of the President's Task Force on Health Care Reform, headed by first lady Hillary Rodham Clinton.

The analysis assumes that the plan would include managed competition, essentially creating large purchasing networks of employers who band to shop for affordable health care, and a global or balanced budget to fund reform.

The analysis also assumed that the plan would cost $120 billion the first year and more each following year; that personal taxes would increase 6 percent to generate about $45 billion; and that the remaining $75 billion would come from a roughly 7 percent business payroll tax.

"There's a large total increase in employment for the first three full years of enactment, followed by gradual year-to-year declines, largely due to productivity increases in the health care-related sectors," says Sims, an economist.

Not surprisingly, the study showed that health care industries had big gains in job growth while the manufacturing sector showed considerable losses.

Sims says the health care sector, though not spared the pruning knife when it comes to cost-cutting, would benefit because spending would be directed toward it. Conversely, while the cost of employing people in manufacturing increased, no direct benefits offset that, he says.

By 2010, the study showed, job growth in health-related fields would drop off, a trend Sims says is attributable to expected improvements in technology and efficiency.

Personal Income

Health care reform would have a negative impact on after-tax disposable personal income, the study finds.

While pretax personal income would rise $34.2 billion in the plan's first year, Sims says, taxes associated with the gain would reduce that to a loss of $18.4 billion.

"After three years of loss in after-tax disposable personal income, the first year of positive gain is incurred in 1999, with that gain being $5.4 billion," Sims says. The study shows the figure rising to $35.2 billion by 2010.

Sims says the study is part of his office's efforts to anticipate national policy changes that might affect Arkansas' future economy and tax base. His office will look next at the impact of health care reform on the state.

Sims says he believes the study is an objective analysis of what health care reform could mean to job creation nationally. But like most quantitative data, he says, it could have a dual interpretation.

"You can be intellectually honest and say that this proposal will cost jobs, and that would be true because there would be a lot of jobs lost," he says. "You can also be intellectually honest and say the proposal will create jobs and be correct because it will create a lot of health jobs."
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Title Annotation:Health Care Update
Author:Walters, Dixie
Publication:Arkansas Business
Date:Jul 26, 1993
Previous Article:Read our lips: small business says 'no thanks' to bearing brunt of health care reform.
Next Article:Headhunting at hospitals: Arkansas facilities find recruiting battle for health care personnel can be cutthroat.

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