The Repeal of Obamacare Comes with Economic Costs

Jan 6, 2017 (San Diego) Republicans are moving ahead with the repeal of the Affordable Care Act (ACA). According to a study published by the Commonwealth Fund, the repeal could lead to the loss of 2.6 million jobs in 2019. It could also lead to a cumulative loss of $1.5 Trillion dollars from 2019 to 2023.

This potentially could lead to the slowdown of the economy, with significant effects. In California, they project a loss of jobs of over 100,000 in California alone. This is a significant loss for the state. This is part of the campaign promises from Donald Trump, but it will come with significant costs, at the end of the business cycle. The study reads

 President-elect Donald Trump and Republican leaders of Congress seek to repeal and replace the Affordable Care Act (ACA)—also known as Obamacare—in 2017. A likely strategy is to repeal two key elements of the health reform law: the insurance premium tax credits and the expansion of Medicaid eligibility. A bill passed by Congress in 2015 (H.R. 3762) sought to do just that beginning in 2018—with no replacement plan—but it was vetoed by President Obama. The new Congress could pass a repeal bill in early 2017 but not develop a replacement bill until later

It could have much broader effects in the state (and by extension national) economies.

  •  employment—the number of jobs lost in health care, construction, and other sectors of the economy
  •  economic activity, such as state gross product (the state equivalent of national gross domestic product) and business output
  •  state and local tax revenues.

It also lowered the number of uninsured people. Regardless of the promises that there will be no lapse in coverage, there are expectations that millions will lose their coverage.

The size of the healthcare sector is such that this will be an economic shock across the overall economy. It comprises about one-fifth of the national economy. (18.5 percent). It not only covers direct services to patients. It is also in the payment of goods and services, so the impact could be severe.

They are clear:

 Federal funding thus initiates an economic cycle that ripples throughout the economy, both within and across state borders. The gains from this cycle also generate additional state and local tax revenues. When federal funds are cut, the results play out in the other direction, triggering losses in employment, economic activity, and state and local revenues.

So with the repeal and nothing to replace it, this could trigger recessionary conditions in the economy. It will also increase the deficit. According to the non-partisan Congressional Budget Office.

 

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Congressional Budget Office

 

 

 Including the budgetary effects of macroeconomic feedback, repealing the ACA would increase federal budget deficits by $137 billion over the 2016–2025 period. That estimate takes into account the proposal’s impact on federal revenues and direct (or mandatory) spending, incorporating the net effects of two components:

Excluding the effects of macroeconomic feedback—as has been done for previous estimates related to the ACA (and most other CBO cost estimates)—CBO and JCT estimate that federal deficits would increase by $353 billion over the 2016–2025 period if the ACA was repealed.

Repeal of the ACA would raise economic output, mainly by boosting the supply of labor; the resulting increase in GDP is projected to average about 0.7 percent over the 2021–2025 period. Alone, those effects would reduce federal deficits by $216 billion over the 2016–2025 period, CBO and JCT estimate, mostly because of increased federal revenues.

While it is not completely clear, their best estimate is that the deficit will increase by $137 Trillion dollars. They also estimate that 24 million Americans would lose any health coverage by 2025. On the other hand, employer supplied health care would increase by 8 million. This means a net gain in non-insured people.

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4 replies

Trackbacks

  1. Repeal of ACA (Obamacare) in the Middle of the Night – Reporting San Diego
  2. Congressman John Lewis Questions Legitimacy of Trump Election, and the Twitter Response – Reporting San Diego
  3. Davis, Peters, Others Speak Against the Repeal of the ACA – Reporting San Diego
  4. CBO Report on Partial Repeal of the ACA – Reporting San Diego

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