By Rose Hoban
As members of the U.S. Senate mark up their version of the health reform bill that was passed by the House of Representatives in early May, economists are warning that in the long run, the bill could lead to as many as 41,000 lost jobs in North Carolina over a decade.
In an analysis released by George Washington University, health economists noted that tax cuts built into the bill would create economic activity through 2020, but as the cuts to Medicaid and health insurance subsidies take effect, the net result will be lost jobs by 2026.
“It’s a little tricky for the American Health Care Act because it sort of has these two different parts,” said Leighton Ku, a professor of health policy at the Milken Institute School of Public Health at GWU.
“What people talk about a lot are the changes in health insurance policy, the cuts in Medicaid and the way that people are changing health insurance marketplaces and how that impacts the premium tax credits,” he said. “And then there are also tax repeals.”
Ku said the way the tax repeals are structured, the federal government will go into deficit for a couple of years and then as the cuts phase in, the tax repeals fade.
“As that deepens, the losses to health care funding will sort of swamp the tax repeals,” Ku said.
First the good news
“The AHCA is really a tax cut that’s financed by Medicaid cuts,” said Don Taylor, a health economist at the Sanford School of Public Policy at Duke. Taylor reviewed the GWU report for NC Health News.
“The AHCA gets rid of the Affordable Care Act taxes and it also gets rid of Medicaid spending. The tax cuts are financed by cuts in the Medicaid program, in simplistic terms.”
Taylor said that he couldn’t be sure about how many jobs the bill – if enacted – would cost North Carolina. But he had no doubt there would be job losses as part of the “indirect” effects of the plan.
“It’s just a question of magnitude,” he said.
According to an analysis from the Congressional Budget Office, approximately 23 million people will lose health insurance by 2026 as a result of the AHCA. But many of those people will lose health insurance later.
First come the tax cuts, which according to Ku, will benefit North Carolina by creating about 26,000 jobs in 2018 and about 30,000 jobs in 2019. The state’s gross state product will increase by $2.4 billion in 2018 and by $2.8 billion in 2019, driven by capital freed up by the tax cuts.
But then, in 2020, the jobs and the boost to the gross state product start to dry up, as cuts to health care spending phase in. Ku said when that happens, more and more people will lose insurance, which will drive job losses in the health care sector and the beginning of an economic contraction.
“If a hospital thinks it’s going to lose money or not going to get money they were expecting, they’ll start to say, ‘Gee, we can’t do this renovation, we can’t add this new wing,’” Ku said.
The results will start to spread out into the community.
“The construction firm that would have gotten the money doesn’t have that money anymore,” he said. “They don’t hire construction workers. The nurses or techs who would have had jobs otherwise now are having a harder time paying mortgages, they don’t go to the shopping mall as often… you name it, it spreads out.”
By 2022, job losses created by health care cuts will have swamped any gains created by the initial tax cuts, Ku said.
“It’s planned to reduce federal funding to health care,” Ku said. “This means people lose jobs in the long run and that’s pretty much Econ 101 when you pull back, you’re going to lose jobs.”
Not all states will suffer effects that are as deep as North Carolina’s, Ku reckoned. California, for instance, has four times the population of North Carolina, but Ku calculates that state loses fewer jobs as a result of the cuts to Medicaid and other health care spending.
He said that’s in part because there are so many rich people in California. He explained the tax repeals in the bill are dramatically skewed to benefit the rich, so 90 percent of the benefit goes to the top 20 percent of income earners. And those people’s tax savings won’t stimulate the economic growth as much as if tax breaks are given to low- and moderate-income earners.
“You give a thousand dollars to a low- to moderate-income person, they’re going to go use it to buy stuff,” Ku said. “If you give a thousand to a millionaire, they’ll bank a lot of it. They’re not going to go to the mall, they’re not going to go do something that will lead to economic growth in the near term.”
It is also possible that while there are federal tax cuts, increases in state taxes may follow to make up for losses to Medicaid.
North Carolina Medicaid head Dave Richard said health officials are concerned about their ability to provide services, including care for kids and adults with disabilities and low-income seniors. Care for those populations drives big Medicaid costs.LINK
“We’re looking for flexibility, we love the idea, but we don’t think there’s any amount of flexibility that allows you to get to a point to where you don’t see that reduction in funding,” Richard said. “The General Assembly will have to make the difficult choices about what they fund with state money versus federal money.”
“What American Health Care Act does, is it’s a redo of the compact between the fed and the states,” Taylor said. “The message is flexibility, but that’s for the state to decide whether to raise taxes or which beneficiaries to cut.”
“Sure, you can think of it as if we have a slashing of the Medicaid program it’ll cost jobs,” he continued.
“But at its base, it’s a huge cut to Medicaid. That’s the first, second and third most important parts of the bill.”