Economic Impact of Repealing Obamacare

Newly elected congressional Republicans are ready to take down the Affordable Care Act, but it’s not the first time that Obamacare has risked getting the axe from the country’s legislative branch. The Restoring Americans’ Healthcare Freedom Reconciliation Act (H.R. 3762) was introduced in January 2016 by Rep. Tom Price (R-Ga.), who’s now slated to be the next secretary of health and human services.

Price’s bill has been dubbed a “repeal and delay” plan whereby critical portions of the ACA would be defunded under the budget reconciliation process, but kept in place until new health provisions are drafted. The comprehensive bill would also eliminate Medicaid expansion and the health insurance exchange subsidies over a two-year period, as well as end the individual and employer mandates immediately.

The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) estimate that repealing Obamacare will increase federal budget deficits by $137 billion between 2016 and 2025. That estimate is averaged from previous estimates showing the potential to dramatically increase or decrease the amount of the deficit depending on the details of a macroeconomic study. Repealing former President Obama’s signature healthcare law could reduce the national debt by as much as $516 billion or increase it by about $353 billion during the same timeframe.

CBO projects several major economic and budgetary changes that could happen as a result of full repeal. Subsidies provided through the insurance exchanges, Medicaid costs in states that opted to expand, tax revenue from mandate penalties, and other financial factors could play an important role in determining the economic viability of a replacement plan.

After 2025, increases in the federal deficit are expected because the net savings resulting from the repeal of the law’s insurance coverage provisions would slow while the estimated costs of repealing the ACA’s other provisions, especially those regarding updates to Medicare’s payments, would continue to grow.

Employment

Per the CBO and JCT estimate, repeal of the ACA would increase jobs and boost the Gross Domestic Product (GDP) about 0.7 percent over the between 2021 and 2025, potentially reducing federal deficits by $216 billion over the next eight years as federal revenues increase.

At the same time, studies done in all 50 states predict that any replacement plan option will include curbing Medicaid and health insurance subsidies, likely to cause great economic losses on state and local levels. Readjusting budgets will remove millions of jobs while simultaneously taking away needed health coverage and services, which could leave many families with greater financial issues than before. Between 2019 and 2023, combined losses nationwide show:

  • Around 3 million jobs
  • Approximately $1.5 trillion in gross products and services
  • About $2.6 trillion in total occupational productivity
  • Around $1 trillion in absorbed hospital costs for at least the next 10 years

Federal investment made by the ACA between 2019 and 2023 would have been about $800 billion, and the cost to remove it may be astronomical in comparison. Repeal doesn’t just affect the 31 states (plus Washington, D.C.) that expanded Medicaid but all other states as well. People surrounding participating states contributed to the economy by working and purchasing goods in those states, and they stand to lose roughly 300,000 jobs as well.

Health Coverage

Repealing the ACA will affect the number of people able to obtain health coverage and where they can find it. CBO and JCT estimate that the number of uninsured people under the age of 65 would increase in 2016 to 19 million and up to 24 million through 2025. The number of people with insurance through their employers would increase by about 8 million, and the number with coverage purchased individually and through Medicaid would decrease by about 31 million.

Republicans believe that removing ACA costs for Medicaid expansion and subsidies for individual insurance will improve the economy rather than create upheaval. Issuing age-based tax credits to people who buy private health insurance will offset these economic losses. The reintroduction of high-risk pools and greater access to health savings accounts will also help. But these measures don’t appear to be enough to compensate for an immediate lack of federal funding.

When a Republican repeal and delay plan leaves subsidies intact but removes the individual tax mandate to purchase insurance, healthy people no longer feel the need to buy plans, leaving the sick and elderly population seeking affordable insurance while increasing costs for the insurance industry and medical service community. Fewer products and services will be available, and those deemed affordable will have reduced coverage and quality. Without the funding provided from the individual mandate taxes as well as device and industry taxes, insurance companies will continue to bail and collapse the exchange.

The Cost of Delaying Health Care Replacement

Delay caused by using the reconciliation process could create chaos and a sound basis for members of the Senate and Congress to rethink their political positions as they see the ramifications unfold, changing their votes when the time comes for actual health provision replacement. The U.S. is still recovering from economic turmoil as employment rates struggle to stabilize. Low-income citizens will be losing affordable health coverage while others lose health insurance along with their jobs as repeal and replacement take place. Time will tell whether it’s possible to transition to a new system without causing more damage in the process.