More than 496,000 health care and other jobs will be lost in 2013 as a result of the 2 percent, or $10.7 billion, cut in Medicare spending mandated by the Budget Control Act of 2011, according to a report from the American Hospital Association, American Medical Association and American Nurses Association. Using an economic impact analysis from Tripp Umbach, the report details the impact the nine-year, 2 percent Medicare sequestration will have on providers and other industries.

The total employment impact predicted by Tripp Umbach is made up of three components: direct, indirect and induced impacts.

  • Direct impact includes all direct effects the funded organizations have on the nation due to the organization operations from the direct Medicare funding. These include direct employees, organization spending, employee spending and spending by visitors to the organization. During 2013, the direct negative employment impact is estimated to be 211,756 jobs.
  • Indirect impact is the effect of local industries buying goods and services from other local industries, which also affects employment in other sectors. The indirect negative employment impact in 2013 is estimated to be 88,453 jobs.
  • Induced impact reflects the re-spending of income. This money is recirculated through household spending patterns causing further local economic activity, which also affects employment. The induced negative employment impact in 2013 is expected to be 196,222 jobs.

While many of the top 10 sectors of the economy that are affected by the reduction in Medicare funding are health care-related, other industries, including real estate, food services, employment services and wholesale trade businesses, also will feel the impact.

Employment losses will increase as the cuts increase. By 2021, the loss of 2 percent in Medicare funding — $16.4 billion — will translate into more than 766,000 fewer jobs in the U.S. economy.

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