California Economy Would Suffer Under ACA Repeal, Researchers Say

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By Joyce E. Cutler

California’s fight to save the Affordable Care Act is bolstered by new statistics on what a repeal of the federal health-care law would do to the Golden State’s economy.

Repealing the Affordable Care Act would cost California $20.3 billion in gross domestic product, 209,000 jobs and $1.5 billion in tax revenue, a University of California Berkeley report released Dec. 20 said.

California, like other states, is searching for specifics under a threatened repeal of the ACA. The health-care coverage law also known as Obamacare added $20.5 billion in federal funds that helped 4.8 million Californians obtain insurance coverage and added jobs, particularly in the health-care sector, the Berkeley researchers said.

“As California is one of the states that made the greatest gains in health coverage under the ACA, it is also one of the states with the most to lose economically if key components of the ACA are repealed,” the report said. The name of the report is “California’s Projected Economic Losses under ACA Repeal.”

“We estimate state and local governments would lose $1.5 billion in local taxes, declines in income and sales tax revenues, on top of the over $20 billion we’re already losing” under changes pledged by the Republican-led Congress and President-elect Donald Trump, report co-author Ken Jacobs told Bloomberg BNA. Jacobs chairs the UC Berkeley Center for Labor Research and Education.

In response to this gloomy scenario, Republican leaders say the effects won’t be known until the form of an ACA repeal and replacement for the law are determined.

Replacement Plans Forming

Yet determining the impact is elusive, as discussion on the federal level hasn’t reached policy or fiscal specifics outside the broad context of repeal and replace, H.D. Palmer, California Finance Department spokesman, told Bloomberg BNA.

“And the question is, what would outright appeal of the ACA be replaced with? And until we have some of the details of how that would be proposed to be implemented, it would be difficult to say with precision what the policy, fiscal and economic impacts of that would be,” Palmer said Dec. 20.

While a replacement hasn’t been determined yet, GOP projections are for more options and lower premiums, Matt Sparks, press secretary for House Majority Leader Kevin McCarthy (R-Calif.) told Bloomberg BNA in a Dec. 21 e-mail.

Another California Republican in Congress, Rep. Devin Nunes, said in a statement: “House Republicans have an Obamacare replacement plan that aims to make good coverage available—without penalties or fines for those who don’t want it—to those who have inadequate coverage or no coverage at all.”

Medicaid Coverage

Medi-Cal, the state Medicaid program, covers one in three Californians. Medicaid expansion under the ACA helped increase the number of insured from 13.5 million in the last fiscal year to 14.1 million this year, state Finance Department figures show. Medi-Cal growth was particularly strong in areas with the highest unemployment, in far Northern California, the Central San Joaquin Valley and Los Angeles.

The next budget, for fiscal year 2017-18, will be introduced in early January by Gov. Jerry Brown (D). While congressional Republicans have vowed fast action on repealing ACA, the budget is likely to come before action on the federal level.

Federal Medicaid expansion added $20 billion to Medi-Cal during fiscal year 2015-16 and more than $15 billion in FY 2016-17, the Finance Department says. That money would be lost under a repeal, Palmer stated.

The state in May will consider the revised FY2017-2018 budget numbers. “If there are new policy developments in the spring, then we have the opportunity to recalibrate our January budget proposal to reflect those challenges,” Palmer said.

Federal funds pay coverage for 3.6 million Californians under Medi-Cal and subsidies for 1.2 million low- and middle-income individuals through Covered California, the state health insurance marketplace, the report said.

An Underestimate?

Healthier workers are more productive, and that isn’t quantified in the report, Dana Goldman, director of the University of Southern California Schaeffer Center for Health Policy and Economics, said Dec. 21.

“In some sense I think they’re missing the big potential impact, that Californians [could become less] healthy. I think all of this points to the fact that if we don’t have a replacement, then California more than other states is going to be adversely affected,” Goldman told Bloomberg BNA. “From my perspective, this number is an underestimate because of productivity and the health benefits.”

Job Losses

Jobs added to care for newly covered Californians would be lost if the ACA is repealed as directed in legislation (H.R. 3762) Congress passed and President Barack Obama vetoed last year. The Berkeley report bases its numbers on provisions in that vetoed bill.

Job losses would be greatest in hospitals, doctor offices, labs, outpatient and ambulatory care centers, nursing homes, dentist offices, other health-care settings and insurers. Suppliers of the health-care industry, such as food service, janitorial and accounting firms, would also experience reduced demand leading to job loss, the report said.

Having insurance is part of a healthy population, and the healthier a population is, “the better it is for our economy and for how people feel. And those numbers aren’t even in the report. They don’t look at the long-term benefits for productivity,” Goldman said.

Tax Aspects

The $1.5 billion state and local revenue drop is the net effect from lost federal health-care spending, tax cuts and elimination of penalties under partial ACA repeal, the researchers said. The federal spending also increases the state’s corporate profit tax revenues, along with some other smaller taxes and fees.

Individuals could spend their tax cuts or eliminated penalties, translating into state and local revenue, the report said. Repeal could yield $6.3 billion in tax cuts to California insurers and high-income households and nearly $1.3 billion in eliminated penalties for uninsured individuals and employers not offering affordable coverage, the researchers said.

Repeal Proponents Weigh In

The leader of a group pushing for repeal argues that the ACA has increased financial burdens on businesses and individuals, and has failed to reduce the underlying cost of care.

“The federal subsidies and additional Medicaid dollars California has been receiving under the ACA come from taxpayer pockets. These same taxpayers are being hit with unaffordable premiums, higher deductibles and lower take-home wages,” Twila Brase, president and co-founder, Citizens’ Council for Health Freedom told Bloomberg BNA in a statement.

In order to keep premiums affordable, insurers have deployed narrow provider networks. Thus, Brase said, “having coverage doesn’t necessarily lead to timely care or care by the practitioner or the hospital of choice. ... Many covered patients cannot get the care that they need where it is most convenient for them to get it from the doctor they want to see,” Brase said.

Without the ACA, California can formulate better options for the uninsured, she continued. Allowing people to purchase insurance plans from outside the state, eliminating the requirement to buy comprehensive coverage (as the ACA requires) and new funding approaches for Medicaid would be an improvement.

“The ACA has led to less access to care, higher prices, and unhappy patients and doctors,” Brase concluded.

Furthermore, congressional Republicans disagree with the report’s job and tax assumptions.

The effect on jobs, economic growth and tax revenue will “vary dramatically depending on what policies replace Obamacare,” Nunes spokesman Jack Langer said in a Dec. 22 e-mail to Bloomberg BNA. “By lowering costs and increasing choice, the House Republican plan for replacing Obamacare will be much more beneficial for the economy than the status quo.”

To contact the reporter on this story: Joyce E. Cutler in San Francisco at JCutler@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

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