Would Overturning 'Obamacare' Create More Jobs?
"We can't afford the job-killing policies in Obamacare," Republican presidential candidate Mitt Romney said and tweeted recently. Repealing President Obama's controversial health care reform on the grounds that it hurts the economy is one of Romney's signature messages.
It's a popular goal, too, as poll after poll shows a majority of Americans is opposed to the Patient Protection and Affordable Care Act, according to RealClearPolitics. Romney and Republicans in Congress have also made it plain that they will try to repeal the 2010 law if the Supreme Court doesn't overturn it before the election. The court's ruling on the constitutionality of the ACA is expected any day.
But will the national economy and jobs landscape actually improve if health care reform is scrapped, either in part or in full, as the Republican leaders claim? Or will the ACA actually make the economy more efficient, allowing employers to add as many as 400,000 new jobs, as Democratic leaders like House Minority Leader Nancy Pelosi suggest?
The evidence is mixed. Nonpartisan experts have studied the Massachusetts law, which was championed by Romney and served as inspiration for the federal reform, and find no negative jobs impact; but critics, including some business owners, predict a grim future, especially for small businesses and their employees. Under the health care reform law, companies with 50 or more employees are required to provide workers with insurance or pay a financial penalty. And American workers who aren't insured through their employers are legally obliged to pay for a private plan, or they too will face a financial penalty.
What Romney's Health Care Reform Law Shows
A new study put out by the Urban Institute with funding provided by the Robert Johnson Wood Foundation suggests that the federal health care reform law won't cause job loss. The nonpartisan Washington D.C.-based research institute analyzed Romney's own health care reform law (which, ironically, he championed as governor of Massachusetts) and how it impacted the jobs market and then compared that to other states that didn't implement health care reform from 2006 to 2010. (The Romney campaign didn't respond to AOL Jobs' requests for an interview.)
The study's authors, Lisa Dubay, Sharon K. Long and Emily Lawton determined that the Massachusetts and federal policies, thanks largely to the common mandate that most individuals be covered either through their employer or by other means, were similar enough to merit a comparison. And the authors do concede: "Economic theory suggests that when employers are required to offer health insurance coverage ... employers will reduce wages and ... employers may respond by demanding less labor."
But that wasn't what happened in Massachusetts, they concluded. "Massachusetts has achieved its goal of near universal health insurance coverage under its 2006 health reform initiative," the authors note, "with no indication of negative job consequences relative to other states as a result of health reform."
Conclusion: "The evidence from Massachusetts would suggest that national health reform does not imply job loss and stymied economic growth."
Does The Law Decrease Wages?
Critics argue that employer health care costs will increase under "Obamacare," and that would cause employers to cut jobs or reduce hiring. Romney's Massachusetts health care law suggests this isn't the case, however. In Massachusetts, when some businesses spent more on health insurance, employers didn't lay off staff, says Dubay. "What we see in Massachusetts is how [increased spending] in fact didn't shift the labor market."
Health care spending "is not as huge a factor on the economy as people think, especially in the near term," says Jared Bernstein, a Senior Fellow at the Center on Budget and Policy Priorities, and a former adviser to Vice President Joe Biden. "Many of the dynamics are offsetting. You would think companies would be able to hire less, but you've got a lot more coverage with a lot more people in the system."
In addition, some provisions of the ACA that kick in by 2014 are designed to help offset the higher health care costs for employers, and therefore reduce the likelihood of employers' reducing their staffs, says Bernstein. The ACA requires medical providers to coordinate care through accountable care organizations so as to reduce duplication.
The ability to "bundle" payments for a medical episode into one bill, as opposed to paying each provider who takes part in the care, has a similar effect. New taxes on high-end "Cadillac" policies also help offset increased spending. These provisions have the effect of making health care spending count for more, and make their spending more valuable, as the argument goes.
Critics Predict A Grim Future
Critics of the law foresee a range of negative fallouts from the ACA, including $1.4 trillion that taxpayers will have to pay to fund the program over the next 10 years. They also argue that the bundling will not make health care more efficient, and see the mandates as leading to job loss. "It's simple: For employers, if you make something more expensive, you'll get less hiring," says Arlene Holen, who is a senior fellow at the Technology Policy Institute and was an associate director of the White House Office of Management and Budget under Presidents Reagan and George H.W. Bush.
Indeed, nearly three quarters of 1,339 small-business executives said, in a survey conducted by the U.S. Chamber of Commerce in March, that the ACA makes it more difficult for them to hire people.
In explaining why the ACA complicates hiring, the critics focus on specific provisions of the law beyond the general mandate. Speaking before the House Ways and Means Committee on Jan. 11, 2011, Douglas Holtz-Eakin, the president of the American Action Forum who was also John McCain's chief economics adviser during the 2008 campaign, addressed the ACA provision that allows companies with less than 50 employees to be exempt from the mandates.
He discussed the impact on a company that adds that 51st employee. Such a decision, he noted, "will trigger a penalty of $2,000 per worker" on the number of employees that exceeds 30 when those workers also receive health subsidies through outside health exchanges. "In this case," he added, "the fine would be $42,000," or 21 times $2,000. "How many firms will choose not to expand?"
Holen, for her part, says low-wage employees are particularly vulnerable under the health care plan. Companies have less incentive to bring on low-earners for whom they will have to provide health care, she argues.
"If a person's salary is very high, then adding another few thousand [for health care] is relatively not significant," she says. "But for someone who isn't going to earn much requires a lavish policy; the employer will look for a machine or someone on the Internet to do the job instead."
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