At first glance, it seems straightforward enough: Expand health care insurance so that patients get access to more care, and there are new jobs to be filled in response to the rising demand for medical services.

This is a good thing, right?

As it turns out, the answer isn’t so obvious. There are many potential trade-offs when it comes to health care reform — top of the list is costs vs. patient outcomes — but the question of impacts on jobs has long been debated by health care economists. It wouldn’t be helpful, for example, if workers hired in response to increased demand for medical care come from other industries that also have jobs to fill.

A new study from Maria Polyakova, an associate professor of health policy at Stanford School of Medicine and senior fellow at the Stanford Institute for Economic Policy Research (SIEPR), sheds new light on this relationship between expanding health care services and job creation. In a working paper, Polyakova and co-authors Martin Hackmann, Roman Klimke, Jörg Heining, and Holger Seibert provide evidence that health care insurance can boost the labor market and the economy overall.

Using rich administrative data from Germany, Polyakova and her collaborators on the research show how that country’s rollout of universal long-term care (LTC) insurance in 1995 increased hiring in the nursing home sector and that the jobs created were filled by workers who were unemployed or otherwise out of the workforce. The evidence shows that mortality rates declined even as newly hired workers were not as qualified as caregivers hired before universal LTC.

The study authors also find that the taxpayer and other public costs of expanding LTC insurance were offset by increases in tax revenues and lower unemployment benefits.

“We identify a trickling-down effect of federal money entering the health care system,” Polyakova says. “Overall unemployment in Germany went down and overall labor force participation went up after universal LTC insurance was introduced. This policy didn’t just generate jobs in long-term care, it also generated jobs in the broader economy as newly hired nursing home workers, for example, could spend more money on more goods and services, like eating out at restaurants.”

Polyakova says the fact that Germany was experiencing high taxes and high unemployment in some areas of the country when it created universal LTC insurance shows how, as a matter of policy, expanding access to health care insurance can be one way of stimulating a weak economy.

Why It Matters for the U.S.

What’s more, the U.S. now faces challenges of an aging population — similar to Germany’s situation 30 years ago.

“The U.S. population is older than it has ever been,” Polyakova says, noting that Census Bureau data show that the median age in the U.S. has risen from 30 years in 1980 to 38 years today. “At the same time, more and more Americans are getting caught in a bind between caring for children and caring for older parents.”

It’s a mixed bag in the U.S. when it comes to paying for long-term care. Americans can buy private LTC insurance — which covers ongoing care needs for individuals with disabilities or chronic illnesses — through their employers or on their own, but not a lot of people do in part because it’s expensive. The government provides for LTC insurance only through state-run Medicaid programs, which provide care for the lowest-income Americans. For people who want LTC insurance but don’t qualify for Medicaid, can’t get it through their employer, or can’t afford the cost, their only option then is to “spend down” their income and assets to qualify for Medicaid.

“It can quickly become a very unfortunate situation and one that, increasingly, a lot of people are affected by,” Polyakova says.

In the debate leading up to passage of the Affordable Care Act, there was a proposal to implement LTC insurance, but it failed because there wasn’t enough support to make it a requirement for all Americans, according to Polyakova. “Without a mandate, long-term care insurance doesn’t work,” she says. “No one wants to buy it because no one wants to think about needing long-term care. If the only buyers are the ones who anticipate needing long-term care for sure, an insurance market cannot work.”

Health insurance policy discussions are fraught in the U.S. and typically focus narrowly on high costs and patient care outcomes. But Polyakova argues that health insurance should also be thought of as a form of industrial policy — which is any government subsidy directed at any specific sector of the economy — that has broader implications. That approach could fundamentally change how we think about the value of public spending on health insurance programs in the U.S.

“At some point, the aging population is a problem that U.S. policymakers will have to face, so we may as well take a broader economic perspective when thinking about solutions,” Polyakova says.

Polyakova’s co-authors were Martin Hackmann of UCLA; Jörg Heining and Holger Seibert, both of the Institute for Employment Research in Germany; and Roman Klimke of Harvard.

This story was originally published by the Stanford Institute for Economic Policy Research and written by Krysten Crawford.