Last week, I wrote a piece called “College kids ‘say the darndest things’ about Obamacare,” in which I reported that a lot more students opposed the subsidies in the Affordable Care Act than I expected, although a lot of them also said that giving people health care was the “right thing to do.” To follow up, I sought out the experts to see what they had to say.
As a general matter, economists don’t know how Obamacare will affect the economy. “There’s a wide range of opinion on the effects of the ACA on long-run growth,” according to Jay Bryson, who is the policy survey chair for the National Association for Business Economics. He coordinated a survey of 230 NABE members that showed 30 percent said it would hurt, 18 percent said it would help, and 42 percent said the ACA would have no impact on economic growth.
The fact that the ACA has no impact on economic growth doesn’t mean the ACA has no impact at all. For one thing, it will encourage a lot of people to buy health insurance – the number of uninsured people will fall by 25 million over the next 10 years. For another, it will increase the government’s role in the economy — the federal government will spend about $2 trillion on insurance subsidies and so forth and collect about $500 billion from penalties and taxes for a net cost of $1.5 trillion over the next 10 years, according to the Congressional Budget Office.
One expert took issue with portraying the ACA’s insurance coverage provisions as increasing the federal deficit. As Bob Doherty, senior vice president of Governmental Affairs and Public Policy at the American College of Physicians, pointed out in an e-mail to me: “Although it is technically true that the costs of the insurance subsidies are greater than the revenue from the insurance coverage provisions, the overall impact of the ACA is to reduce — not increase — the deficit when all other provisions (revenue, cost reductions) are taken into account.” He added that the typical lay person might conclude that the ACA increases the deficit even though the CBO found that the ACA lowers the deficit after taking into account all of its provisions.
As he highlighted to me, “Surveys consistently show that the public’s views of the ACA are more negative if they believe it adds to the deficit and more positive if they are told it reduces the deficit.”
Well said, Bob. It’s a bad idea to give the wrong impression.
In fact, the ACA reduces the deficit “significantly over the next decade and massively in the decade after,” as Jonathan Gruber, an economics professor at the Massachusetts Institute of Technology, told me in an e-mail.
Point taken. The ACA does increase government spending and it does increase government revenue, but it does not increase the federal budget deficit.
With that settled, let’s turn to another impact of the ACA.
The CBO estimated that the ACA would lead to 2.5 million fewer workers by 2024 as people voluntarily leave their jobs because they’re no longer locked to that job just to obtain health insurance or choose to work less so they may qualify for insurance subsidies, and as employers reduce their demand for workers due to higher taxes.
This report set off a firestorm fueled, in part, by the work of University of Chicago economist Casey B. Mulligan, who became “The Economist Who Exposed ObamaCare,” according to The Wall Street Journal, because of his “conclusion that ObamaCare will, in fact, harm growth and jobs.”
So, what did Mulligan say about how the Affordable Care Act affects jobs?
Nothing really controversial. In a piece titled “Demoralization Is Not a Policy Achievement” in The New York Times, Mulligan wrote that whether it’s been through mortgage modification programs, extended unemployment benefits, or the ACA, the federal government has been reducing the “reward to working” by introducing policies that cut benefits as work hours increase.
Case in point: Under the ACA, the less you make, the more you get in insurance subsidies. Of course, this doesn’t mean that everyone prefers receiving government benefits to having a job, but it’s also plausible that some people do.
This isn’t such good news, so I asked Mulligan how can the government help low-income people buy insurance if it doesn’t give them subsidies, and if the government doesn’t base subsidies on income, how can it avoid giving benefits to people who don’t need them?
Mulligan sees things as quite simple, as he explained in an e-mail to me. “The primary reason that people work is to buy stuff for their families: food, shelter, healthcare, schooling, etc. If people can get some of that stuff without working, we don’t expect as many people to work. The reason why workers had more incentives to work before the ACA is that people above the poverty line had to work to pay for their healthcare, or go without. There’s no way around the basic fact that work is rewarding only if there’s something valuable that workers get that non-workers do not.”
It seems clear where Mulligan stands on this issue. Yet, not all economists agree with these dire predictions on work effort. One of these is the MIT economist who The New York Times nicknamed “Mr. Mandate” for his role in insisting that the health reform proposal had to require people to buy insurance for it to succeed.
Jon Gruber is more than Mr. Mandate, however. Gruber helped design both Romneycare in Massachusetts and Obamacare and is smart enough to know that taxes and subsidies do affect a person’s incentive to work. Where he disagrees with Mulligan, however, is over how important those incentives are. Gruber argues that the ACA’s beneficial impact on labor productivity is more important than the disincentive to work created by the phase out of tax breaks as income increases.
As Gruber said to me in an e-mail, minimizing the work disincentives while also giving benefits to people who need them “is the inherent tradeoff.”
In a world where we can’t have it all, how should we balance fairness and efficiency?
Again, I turned to the experts and asked how we should evaluate whether fairness mandates that the U.S. provide subsidized health insurance even at the expense of economic efficiency.
Elise Gould, a Ph.D. economist who directs health policy research at the Economic Policy Institute in Washington, told me in an e-mail that “Fairness in health care is about what kind of society we would like to create for ourselves. Efficiency is about making sure that health care is provided in a timely and cost-effective manner. The ACA promotes both fairness . . . by making health care more accessible and affordable . . . and efficiency in various ways, such as increasing the availability of preventive medicine, reducing the use of last resort health care (ER visits) relative to health maintenance and treatment at earlier stages of illness.”
Those are good points, but I still wanted to know whether the U.S. has a moral obligation to provide health insurance.
“Do we have a moral obligation to provide health care to people who would otherwise die in the streets?” Gould asked. “Unabashedly, I say yes and would venture to guess that most people would as well.”
To Gruber, the issue isn’t really so much about whether people have health insurance, but whether they have financial protection. “The major moral issue here is that we are the only developed country in the world that subjects our citizens to the financial risk of medical bankruptcy,” Gruber said, adding that “that [risk] ended on January 1” when the ACA came into effect.
True, but there’s more to consider. Mulligan wondered whether a “moral system that completely disregards the real costs that the ACA has been, and will be, imposing on people through no fault of their own,” is justified, noting that plenty of people have already lost their insurance coverage or will be put out of work by the Affordable Care Act.
Whereas George Washington University sophomore Atticus Franken had said that providing health insurance is morally “the right thing to do,” Mulligan wondered whether our moral system is one that says that we “absolutely have to do something without regard to what it costs or even without regard to whether it’s feasible.”
So, where do we stand now that we have the college kids’ and the experts’ views?
You tell me.