Obamacare repeal without replace would cost $140 billion in funding, kill more than 2 million jobs

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Snowball effect would mean a cumulative $1.5 trillion loss in gross state products, $2.6 million reduction in business output from 2019 to 2023.

Published: January 07, 2017

Jeff Lagasse, Associate Editor

President-elect Donald Trump and Congressional Republicans have made clear their intentions to repeal the Affordable Care Act, but a new analysis from the Commonwealth Fund finds that repeal, without a replacement, would result in a $140 billion loss in federal funding for healthcare in 2019, leading to the loss of 2.6 million jobs, most of them in the private sector.

Without replacement policies in place, there would be a cumulative $1.5 trillion loss in gross state products and a $2.6 million reduction in business output from 2019 to 2023, the analysis shows. The state, and healthcare providers, would be particularly hard-hit.

Congress and the new administration would likely begin by targeting the ACA’s insurance premium tax credits and the expansion of Medicaid eligibility. Commonwealth’s research shows that the loss of those two provisions would double the number of the uninsured, cause higher uncompensated care costs for providers and hike taxes for lower-income Americans.

Healthcare will comprise almost one-fifth of the nation’s economy by 2019, so major changes to the healthcare landscape would reverberate across other parts of the economy.

To track this, Commonwealth analyzed funding flows from the federal government to states, consumers and businesses. Federal tax credits first flow to health insurers. Most of that money, aside from overhead, goes to hospitals, clinics, pharmacies and other providers. Those are the direct effects of federal funding.

Most of the revenue earned by providers is used to hire staff and pay for goods and services, like clinic space or medical equipment. In turn, those vendors pay their employees, and additional goods and services. Those are the indirect effects.

Lastly, the workers use their incomes to pay for food, mortgages, rent, transportation, etc., which provides income to other business and industries. Those are the induced effects. When federal funds are cut, it triggers losses in employment and economic activity.

State and local tax revenues would also fall during that period, dropping by an estimated $48 billion. State and local governments could be faced with declining revenues, and safety-net health care providers would see their uncompensated care costs rise sharply as millions of people lose their insurance.

According to Commonwealth, canceling states’ Medicaid expansions lowers federal funding by $466 billion from 2019 to 2023. This would lead to 1.5 million fewer people with jobs in 2019. Moreover, gross state products would shrink by nearly $900 billion and state and local tax revenues drop by $29 billion. The majority of those losses would occur in the states that have expanded Medicaid, but the 19 states that haven’t might also experience major setbacks. Collectively, they would lose about 338,000 jobs in 2019, even though they don’t receive the direct federal matching funds for Medicaid expansion.

For a state-by-state comparison, Commonwealth looked at eight states, five of which expanded Medicaid. The hardest-hit state was non-expansion Florida, which would stand to lose $54.4 billion in federal funding, 181,000 jobs, $146.46 billion in business output and $90.42 billion in gross state product from 2019 to 2023.

Among Medicaid expansion states, Pennsylvania would feel the hit the most, losing $36.9 billion in federal funding, more than 137,000 jobs, almost $129 billion in business output and more than $76 billion in gross state product. Ohio comes in at a close second, with $34.9 billion lost in federal funding, about 126,000 jobs, $119 billion in business output and $69 billion in gross state product. Even Maine, with a population of fewer than 1.5 million people, would drop $2.7 billion in federal funding and about 13,000 jobs.

In the five expansion states, the majority of lost jobs and economic activity are caused by Medicaid expansion repeal. In the other three states, the majority of losses are caused by tax credit repeal.

It’s still unclear what a Republican replacement plan might look like. But an analyses by the RAND Corporation found that the broader tax deductions recommended by the Trump team during the presidential campaign would increase federal costs, with little gain in insurance coverage. Any savings would primarily help those with higher incomes.

Twitter: @JELagasse