Outsourcing and Healthcare Policy in the US - Research Paper Example

Outsourcing and Healthcare Policy: The Two-Way Connection Introduction The latter half of the 20th century for the U.S. was marked with the growing commitment to outsourcing. Outsourcing became an urgent response to the growing employment and administrative costs in business and proved to be an effective tool of business expansion and globalization. Outsourcing is believed to be the basic threat to the stability of labor markets in the U.S. – outsourcing is often cited among the ways of throwing American employees into the street. However, that outsourcing fits perfectly well into the current system of globalized business relations is difficult to deny. It would be fair to say that globalization and outsourcing go hand in hand, and while globalization opens new outsourcing opportunities and increases the demand for outsourcing jobs, outsourcing, in its turn, reinforces the development of globalization and integration of the national job markets into one single cohesive system of labor relations. Health Care reform in the U.S. became the turning point in the development of the country’s healthcare system. Obviously, the outcomes of the reform will influence all businesses and all corporate players, without any exception. Given the current economic processes and the potential impact of the new policy on businesses, the new system of health care and the growth of insurance coverage will result in more outsourcing. Firms will apply to outsourcing to avoid administrative overhauls and bureaucratic complexities that are associated with the growing number of insured employees. In their turn, health care facilities and corporations will apply to outsourcing to minimize the costs and problems while trying to adjust to the new technological policy requirements. The history of outsourcing in the United States dates back to the times when the United States sought to catch the grip of control over stagflation. The beginning and the middle of the 1970s in the U.S. were marked with the growing unemployment and inflation which slowed down economic growth in the country (Gupta 12). Meanwhile, the Fed raised interest rates to almost 20%, hoping that high interest rates would work against inflation but their effects on the economy were virtually the opposite (Gupta 14). In 1981, the U.S. entered the period of continuous recession which was accompanied by the dramatic increase in the value of dollar (Gupta 15). The U.S. decision to bring down the value of dollar was too late and America had already been in the midst of the severe unemployment. Car companies were the ones to suffer the consequences of unemployment and recession the most. The growing foreign competition and the increasing costs of production resulted in unprecedented measures: GM was the first to close ten of its factories and to move them to Mexico – that was the beginning of what later was called outsourcing (Gupta 17). The history of outsourcing in the U.S. sheds the light on the reasons that stand behind the growing scope of outsourcing in America: its remarkable ability to reduce labor costs. Following GM, the major filmmakers in the U.S. moved their businesses overseas and hired plenty of foreign English-speaking workers, which contributed to the development of filmmaking in the U.S. (Gupta 20). The growing rates of outsourcing were followed by and resulted in the manufacturing increase, while the U.S. firms were searching for additional opportunities to do business in foreign countries. Globalization opened the new frontiers, and American employees were no longer valuable. Instead of hiring one engineer for $80,000, American companies hire 10 foreign English-speaking engineers for the same sum of money (Gupta 18). With time, outsourcing became the distinctive feature of the American IT business – today, IT business outsource the majority of their personnel and can boast having one of the best indices of efficiency and cost-efficiency across the most flourishing U.S. industries. With cost-effectiveness as its basic advantage, outsourcing continues to be an attractive policy and strategy target for thousands of large and medium businesses in the U.S. From time to time, economic and policy changes make corporations and firms reconsider their approaches to hiring and retaining personnel; however, more often than not, new policy developments and solutions prove outsourcing to be extremely beneficial to businesses. As a result, more and more firms consciously choose to hire a foreign worker, to save thousands of American dollars. Recent health care policy developments became the turning point on the American way to better health care. Barack Obama claims that 32 million of uninsured Americans will finally get access to desirable insurance and will finally acquire a sense of confidence regarding their health and their future (Basu). It should be noted, that the lack of universal insurance coverage in America used to be one of the basic reasons behind the growing scope of outsourcing in the U.S. “Perhaps the largest reason why U.S. jobs are migrating overseas is because of the cost of health care! The United States is the only industrialized nation that does not have a universal health care system” (Lindstrom). For example, the cost of health care insurance for a Chinese employee does not exceed $7.00 per year, 40% of which are being paid by the national government, other 40% paid by the provincial government, and only 20% (or $1.40) paid by the employee (Lindstrom). Compared with the U.S., which is notoriously famous for the highest costs of health care in the developed world, Chinese health care expenses are a trifle and it is clear now why American employers would prefer hiring a Chinese worker to paying huge costs for an American one. Does that mean that the development and implementation of the universal system of health care will give American employers better opportunities to hire American personnel? Surprisingly or not, but the answer to this question is negative. Regardless of the recent policy developments, they are likely to contribute to the growing levels of outsourcing initiated by the American companies, and there are two reasons for that. Looking back to the labor and outsourcing developments in America and beyond, it is clear that outsourcing has already become one of the basic means companies use to reduce their costs. Hollins is correct when he says that when globalization opened international labor markets, Ricardo’s concept of ‘comparative advantage’ in international trade changed from productivity as its basic measure to governments: today, these are the governments designing policies, which push countries to see profits not in their countries but elsewhere. The U.S. outsources jobs, technology, investments, and production, and the new health care policy will push employers to outsource even more. The fact is in that additional 32 million of the insured workers are likely to result in a serious administrative overhaul, which only few businesses are willing to endure and to face (Tozzi). Others will seek additional opportunities to avoid these administrative complexities, and outsourcing looks like the most attractive chance for corporations and firms to reduce their bureaucratic and administrative concerns. The new health care policy and the growing number of insured workers will reflect in “increased business process requirements, while customer service, claims processing, and revenue cycle management crop up as the firms will be trying to adjust to the new conditions of doing business in the U.S.” (Tozzi). Taking into account the current economic conditions and the negative impact of recession on the basic economic processes in the country, additional administrative costs may readily throw companies, especially companies that experience financial difficulties, into economic abyss. The growing unemployment and the decreasing demand for consumer and other products make firms extremely vulnerable to the questions of employment and labor relations. In the current economic conditions, companies will not risk their stability and limited financial costs for the sake of following new policy requirements. As a result, a high probability exists that companies will continue searching for the talented personnel overseas. The new health care policy will drive outsourcing not only because companies will seek to adjust to the new insurance requirements but because new policies impose new criteria of technological and business performance on health care facilities. Like many other firms in different industries and economic sectors, health care firms await the growing burden of administrative responsibilities. Economic professionals and health care specialists view the new policy as the heaven for Indian outsourced personnel, because India is one of the first expecting more workload due to Obama’s health care initiative (Barnes). “The addition of 32 million insured American is very significant for Indian outsourcers; companies like this will see increased opportunities as US health insurers and hospitals scramble to reorganize to comply with the new law” (Barnes). Insurance companies and health care facilities will have to enroll new members, organize larger databases, process more insurance and compensation claims, provide more support, and control more revenues (Barnes). All these Indians view as the potential opportunities for their further integration with the American health care markets. Because more than 40 percent of each health care plan accounts for administrative costs, health care and insurance companies will welcome Indian outsourcing initiatives and will thus significantly reduce their costs (Barnes). At the same time, because the new policy and technological requirements serve the natural extension of the back office services which India already provides to the U.S. firms, it will be easy and effective to expand the boundaries of economic and labor cooperation with the outsourced personnel from India. In this sense, the expected growth of outsourcing as a result of the proposed health care reform exemplifies a two-way street: while health companies require that firms and businesses in the U.S. enroll their employees in the basic insurance plans and, to reduce their insurance costs and expenses, apply to the benefits of outsourcing, the growing number of insured populations and the changes in the basic business processes push these very insurance and health care companies to outsource, too. Both sides of the policy implementation will contribute to the growing number of the foreign personnel in all markets and industries, thus turning the new health care policy into the basic driver of outsourcing in the U.S. Conclusion The history of outsourcing dates back to the middle of the 1970s, when stagflation made companies search alternative solutions to their cost-effectiveness issues. Throughout the latter half of the 20th century and the beginning of the new millennium, outsourcing was used as an effective means to reduce business expenses. Companies applied to outsourcing to reduce their labor costs and were able to increase the overall efficiency of their business operations. Today, outsourcing is a popular economic measure, especially in the IT sector. The new health care policy is likely to become another driver of outsourcing in the U.S. The growing number of insured workers will result in additional administrative costs and bureaucratic difficulties, which firms will try to avoid by all possible means. Health care companies will apply to the benefits of outsourcing to ease the burden of administrative and technological transformations required by the new law. In the current economic conditions, when firms are particularly vulnerable to various costs and expenses, outsourcing will become the best opportunity for firms to adjust to the new health care conditions of business performance. Works Cited Barnes, T. “US Healthcare Reform Is Boon for India Outsourcing Companies”, CSM Monitor. CSM Monitor, 25 March 2010. Web. 3 May 2010. Basu, I. “U.S. Healthcare Bill Could Be a Bonanza for Indian IT Outsourcing”, Digital Communities. Digital Communities, 23 March 2010. Web. 3 May 2010. Gupta, A. Outsourcing and Offshoring of Professional Services: Business Optimization in a Global Economy. Idea Group, 2008. Hollings, F. “Sober Up”, Huffington Post. Huffington Post, 13 March 2009. Web. 3 May 2010. Lindstrom, C. “Outsourcing U.S. Jobs and Health Care Reform: A Critical Issue”, Depot Dazed. FIOA, 17 November 2009. Web. 3 May 2010. Tozzi, J. “Outsourcing Firm’s Latest Offering: Health Insurance”, Business Week. BusinessWeek, 26 February 2010. 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