It may not crash the economy, but repealing key provisions of the Affordable Care Act would certainly create job losses in every state.
That’s the consensus of a growing body of studies that suggest the economic fallout from the health law’s partial demise would ripple through the entire economy, not just the health care sector.
Most of the job cuts would result from two factors: the loss of federal spending for premium tax creditsthat help people pay for marketplace coverage, and the loss of spending for Medicaid services, particularly in 31 states and the District of Columbia which expanded eligibility for the program.
Generally, job losses due to cuts in Medicaid spending would be greatest in those expansion states. In non-expansion states, job losses from the ACA repeal stem more from the loss of federal premium tax credits.
Among working-age adults under age 65, some of the hardest-hit states would be Kentucky, Louisiana, Maryland, North Carolina, Washington and West Virginia.
“These are not job losses that would send us back into a recession,” Bivens said, but they could potentially cut the rate of job creation by 50 percent.
“I think that would have a material effect,” Bivens said. “I think people would notice that. The economy would feel less tight. The labor market would feel less tight. It just wouldn’t feel like a place where people were super confident they’d be hired quickly if they lost their jobs. So, not a recession, but a noticeable slowdown.”
A similar study by The Commonwealth Fund and the Milken Institute School of Public Health at the George Washington University estimated that 2.6 million people would lose their jobs in 2019 if funding for premium tax credits and the Medicaid expansion were halted. That could grow to nearly 3 million by 2021, according to the study.
Bivens said his job-loss estimates are lower than those in the Commonwealth study because his projections reflect potential job gains resulting from termination of the ACA’s higher Medicare taxes and its surcharge on earnings above $200,000.
In the Commonwealth study, California’s estimated 334,000 job losses would lead all states followed by Florida with 181,000 lost jobs, Texas with 175,000 and Pennsylvania with 137,000. An estimated 76,000 would lose jobs in North Carolina.
The health sector would absorb about 912,000 of the job losses, Commonwealth reports, as nurses, health technicians and other would likely face layoffs.
But some two-thirds of the job losses would involve other industries, like construction, real estate and finance, said Leighton Ku, Director of the Center for Health Policy Research at George Washington University.
That’s because health care dollars, which make up nearly one-fifth of the nation’s economy, help drive all sectors of the economy.
Most federal funding for the ACA goes to health insurers in the form of premium tax credits which then goes to hospitals, pharmacies and other care providers to pay for services.
Federal Medicaid funds go to health care providers who use it to pay their employees and to buy goods and services. That money then continues to circulate, paying for food, mortgages, transportation and other services and generating tax revenue as it moves through the economy into non-health care sectors.
“Federal funding thus initiates an economic cycle that ripples throughout the economy, both within and across state borders,” the Commonwealth study found. “When federal funds are cut, the results play out in the other direction, triggering losses in employment, economic activity, and state and local (tax) revenues.”
“That’s why there are these repercussions that occur outside the health sector,” Ku said. “There are downstream effects that go well beyond that.”
A recent report by the University of California, Berkeley’s Center for Labor Research and Education estimates that California would lose 209,000 jobs if the ACA was repealed and not replaced. The Pennsylvania Budget and Policy Center, a nonprofit government research organization, estimates that state would lose 137,000 jobs through the ACA repeal.
Ku said he expects the final repeal legislation will be more moderate “because the outcomes are so horrible.”
“I don’t think anyone wants to see 20 million or 30 million people lose their health insurance in a year,” Ku said. “Nor do they want to see these huge job losses. So they would (likely) moderate (their proposals) either by making these things less horrible by way of repeal or, by having other replacement policies.”