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Economists: AI Can Narrow US Deficits via Healthcare Improvements

2024-11-28

According to a study from the Brookings Institution, AI holds the potential to bring a positive shock to the U.S.'s fiscal health. This could potentially lead to a reduction in the fiscal deficit, which is a significant concern for the country's economic stability. The report forecasts that by 2044, AI could lower the U.S. budget deficit by 1.5% of GDP, approximately $900 billion in nominal terms. This could have a profound impact on the nation's financial situation.

Unleashing the Power of AI to Transform Fiscal Health

AI and Health Care Services

The incoming Trump administration raises important questions about how AI might be implemented in delivering health care services. The Brookings Institution's study highlights the various channels through which AI can increase productivity and improve health care. Basic tasks like appointment scheduling can be automated, and more complex tasks such as patient flow management and preliminary data analysis can be handled by AI programs. This not only makes health care more efficient but also has the potential to "democratize" access to the system by providing more options for preventative medical care.AI's impact on health care extends beyond efficiency. It has the potential to transform the cost of care and the rates of illness, disease, and death. By improving diagnostic accuracy, AI can reduce wasteful spending on inappropriate treatments and lead to a healthier population. This, in turn, could have positive implications for Social Security and public health program outlays.

AI and the Fiscal Deficit

A more efficient health care system driven by AI could ease the pressure on the government's fiscal deficit. With the federal government spending an estimated $1.8 trillion on health insurance in 2023, accounting for around 7% of GDP, and projected subsidies totaling $25 trillion from 2024 to 2033, any improvement in efficiency can make a significant difference. By reducing administrative functions and optimizing treatment plans, AI has the potential to cut costs and lower the deficit.However, the adoption of AI in health care is not without challenges. There are impediments tied to regulation and incentives that need to be overcome. Economists like Ajay Agrawal at the University of Toronto's Rotman School of Management express a mix of enthusiasm and despair. While they recognize the potential benefits, they also highlight the friction due to regulation and incentives that can slow down the implementation process.

AI in the Public and Private Sectors

So far, diagnostics has shown the most advances in applying AI in health care. AI has already demonstrated "superhuman performance" in various diagnostic areas, from receiving input data to analyzing medical imagery. It has also shown significant promise in optimizing treatment plans through data analysis, developing more effective and less costly plans for individual patients.In the U.S., private insurers have generally been more keen on AI technology associated with preventative treatment. However, there has been less interest in using AI in diagnostic applications, which could lead to an increase in cases and more treatment. Public-private partnerships will be crucial in driving the rollout of AI across health care. The public health care sector needs strong incentives to drive change, while the private sector provides a stronger motivator in terms of cost reduction and profit generation.

AI under the Trump Administration

President-elect Donald Trump's second term could have a significant impact on the rollout of AI in health care and its economic impact. Trump has vowed to reduce government spending and form an outside panel to "dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies." Public health funding is one area that could face cuts, which could frustrate the ability to roll out AI applications.On the other hand, rolling back regulations under a second Trump administration could expedite the implementation of AI across health care. While there are legitimate concerns about immature technologies harming people, there are also domains in diagnosis that are ready to go and could benefit from reduced regulations.In conclusion, AI has the potential to be a game-changer for the U.S.'s fiscal health. While there are challenges to overcome, the benefits are significant. By improving health care efficiency and reducing costs, AI could help lower the fiscal deficit and lead to a healthier population. Public-private partnerships will be essential in realizing this potential.

In Dixon, a significant transition is on the horizon as OSF HealthCare gears up to take over the operations of KSB Hospital starting from January 1, 2025. This move is set to bring about changes and opportunities for the local healthcare landscape. A long-time OSF employee has been selected as president, while a long-time KSB Hospital employee will serve as vice president.

Leadership Shifts and Their Impact

Jackie Kernan, who has been with OSF since 2009, will assume the role of president of OSF HealthCare Saint Katharine Medical Center. This will be her third time leading a community hospital through a merger with OSF. As president, she will be responsible for aligning the hospital with OSF's overall strategy and directing internal operations while ensuring high-quality and cost-effective healthcare for all patients.Kernan earned her bachelor of science in nursing from the University of St. Francis and her master of science in nursing management leadership degree from the Saint Francis College of Nursing. She currently serves as president of OSF Saint Luke Medical Center in Kewanee and OSF HealthCare Saint Clare Medical Center in Princeton. She will continue to act as interim president at these locations until a new president is named.Drew Fenner, former vice president and chief quality officer of KSB Hospital, has been selected for the vice president position. He has been with KSB for over 10 years and will oversee operations and special projects at OSF Saint Katharine.

Renaming and Facility Improvements

KSB Hospital will be renamed OSF HealthCare Saint Katharine Medical Center in honor of Catholic Saint Katharine Drexel. This renaming is part of the integration process and marks a new chapter for the hospital. The agreement includes $40 million in funding for facility renovations to improve access to care locally and create seamless referrals to subspecialties.KSB Hospital, an independent, nonprofit organization with 80 beds, offers traditional inpatient and outpatient services in downtown Dixon. It also operates an integrated medical group with 70 practitioners providing medical services in primary and select specialty areas at six locations in Lee and southern Ogle counties. With the affiliation, KSB expects to continue employing its staff and making significant investments in building and technology to enhance access to specialty resources in the local community.

Challenges and the Path Forward

KSB began exploring potential partnerships in February due to escalating operating and staffing costs, as well as changes in healthcare financing and patient usage. The hospital's board analyzed the feasibility of continuing to operate independently and found that it would likely lead to closure.After the COVID-19 pandemic, KSB experienced an increase in expenses including wages, pharmaceuticals, utilities, facility costs, and medical supplies. These increased expenses were not covered by increased reimbursement rates as KSB serves a large portion of Medicare and Medicaid patients who are reimbursed at a lower rate than commercial insurance. As a result, KSB operated with negative margins in 2022 and 2023, eroding the balance sheet. In January 2024, the hospital's cash on hand dropped to five days, making it impossible to borrow funds and reinvest in the organization.However, with the partnership with OSF HealthCare, there is hope for a brighter future. OSF HealthCare, with 16 hospitals and 2,131 licensed beds throughout Illinois and Michigan, and about 24,000 "mission partners" across more than 150 locations, brings extensive resources and expertise to the table. It operates various units such as OSF OnCall, OSF Home Care Services, OSF HealthCare Foundation, and OSF Ventures to support the healthcare needs of the community.

Healthcare assistants play a vital role in Europe's health systems, yet their wages lag far behind. A recent report by the European Federation of Public Service Unions (EPSU) exposes significant pay differences that are only worsening with rising living costs. This situation creates a highly unstable environment for workers.

Uncovering the Wage Gap in Europe's Healthcare Sector

International Wage Disparities in Healthcare Assistants

In a comparison of 15 European countries, EPSU's researchers discovered concerning salary variations. In Germany, an assistant's median hourly wage is around €20, while in Romania, it is less than €5. Romania stands out as an extreme example, with the report noting that even degree-qualified nurses earn, on average, 22% less than the national median wage. This wage gap clearly shows why Romania is struggling with health worker brain drain.Healthcare professionals' salaries often fall well below national average and median incomes. In some cases, like in England, Ireland, and Spain, some healthcare assistants are paid as little as the national minimum wage. Despite this, they handle important duties such as assisting with patients' personal hygiene, helping with meals, and monitoring vital parameters.

The Impact of Task Shifting on Healthcare Assistants

Many of these responsibilities were originally part of nurses' workloads but have been shifted to assistants as part of a broader trend. Mainstream health policy analysts view task shifting as a way to redistribute workloads within a depleted workforce. However, for employers and policymakers, it seems to mean expecting workers to take on more tasks with significantly less training and pay. For instance, in England, healthcare assistant training can be completed in as little as one month, compared to the three years needed to become a nurse.According to Can Kaya from EPSU, there is another crucial aspect of task shifting regarding health workers' rights. While presented as a technical solution, in practice, it often leads to cutting corners and costs in health workforce plans. "It means shifting tasks to lower-paid workers to save expenses," Kaya explains. As a result, healthcare assistants are stuck at the intersection of workforce shortages and austerity.

The Role of Trade Unions in Addressing Wage and Workload Issues

The presence of trade unions can make a difference in this situation. Even in the private sector, when unions are present, the wage gap tends to be less pronounced. For example, in select Scandinavian countries with high unionization rates in private institutions, wage gaps are narrower compared to Italy, where trade unions are stronger in the public sector.In some cases, healthcare assistants in the public sector can earn 30% or more than their counterparts in private institutions spreading across Europe. The largest differences between public and private wages are seen in Italy, Ireland, Spain, and Cyprus. This highlights another factor contributing to wage disparities, as Kaya explains: "The private sector is a business focused on maximizing profit, which it achieves by paying workers less. Commercialization drives lower wages."

The Failures in Europe's Health Workforce Strategy

The current staffing crisis is a national and European issue. National governments have a duty to safeguard the health and care sectors. Kaya emphasizes that the European Union must also take action, including revising its fiscal rules. "Austerity will only make the staffing crisis worse," he warns. More decisive action and investment at all levels of European governance are crucial to combat staff shortages and ensure safe staffing levels.People's Health Dispatch is a fortnightly bulletin published by the People's Health Movement and Peoples Dispatch. For more articles and subscriptions, click here.