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Health Care Costs and Educational Productivity

Atul Gawande's latest New Yorker article on efforts to rein in health care costs by better serving the highest-cost/highest-need patients is great reading. But this paragraph near the end particularly jumped out at me:

Yet the stakes in health-care hot-spotting are enormous, and go far beyond health care. A recent report on more than a decade of education-reform spending in Massachusetts detailed a story found in every state. Massachusetts sent nearly a billion dollars to school districts to finance smaller class sizes and better teachers' pay, yet every dollar ended up being diverted to covering rising health-care costs. For each dollar added to school budgets, the costs of maintaining teacher health benefits took a dollar and forty cents.

Health care costs are a bigger than often recognized part of what we're talking about when we talk about "unsustainable cost structures" in K-12 public education.

Costs for educators' healthcare benefits have been rising rapidly, in a way that is both not sustainable and cuts into funding for other types of compensation. When people talk about this at all, they tend to talk about teachers' "Cadillac health plans"—and its true that public educators do tend to have much more generous health benefits than the typical worker. But it's important to recognize that that's only part of the issue. Teacher health care costs are affected by the same forces that are spurring out-of-control cost growth across our entire health care system. And because health benefits make up a larger share of teachers' total compensation than they do for many other workers, rocketing health care costs have a particularly outsized budgetary impact here.

As states and districts confront the need to rein in spending growth and improve productivity in K-12 education, they're also going to need to deal with health care cost growth, and there is going to be pressure to adopt less generous teachers healthcare benefits—which will obviously be unpopular with teachers.

Gawande's article, though, got me wondering if there are some alternatives here. One of the really interesting focuses in health care reform—and an area that Gawande's journalism often emphasizes—is the idea that we can rein in health care cost growth not just by taking the ax to services, but also by improving efficiency and coordination in our fragmented and dysfunctional health care system, and that some of those strategies can actually generate improved outcomes while reining in costs. But implementing these strategies requires significant changes in how the system and its participants behave, changes that may complicate the lives or threaten the interests of entrenched groups (sound familiar, anyone in education?). There are some promising initiatives underway (such as those Gawande describes) and policies in the recent health care legislation designed to alter some of the incentives here. But it's really just a beginning.

States, districts, and teachers' unions seem to be ideally positioned to work together to pursue some of the types of cost-reducing and efficiency-enhancing reforms Gawande and other health reform experts write about, and to do so at significant scale. Public education systems are major employers and purchasers of health care, and all parties have major incentives to work towards ways to rein in costs while minimizing cuts in services. Other labor unions—such as the Atlantic City casino workers union in Gawande's article—are already engaging in such initiatives. I'm probably overly optimistic here, but at least it's worth thinking about.

On another note, I think one of the biggest problems in education policy is the isolation of education debates from other industries and policy spheres. A lot of the challenges facing health care reformers—reining in cost growth, recognizing and rewarding quality and outcomes rather than procedures, modernizing delivery, improving equity and efficiency, getting better at preventative health and changing patient and doctor behavior—have real overlaps with challenges we face in seeking to improve public education. Moreover, we know that skyrocketing health care costs have real impacts on educational productivity, and also that educational attainment has real impacts on individuals' later health outcomes. But there's very little combined discussion or sharing of learning across the two sectors. That's unfortunate and probably impoverishes our ability to develop effective solutions in both spheres.

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