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How Repeal of the ACA Affects the Economy

Since Donald Trump became president, discussion about repealing and replacing the Affordable Care Act (Obamacare) has intensified. Repealing the healthcare law that brought health insurance within reach for millions of Americans was one of the centerpieces of Trump’s campaign. But what if the ACA gets repealed without a replacement plan in place? There’s a lot of uncertainty about how this would affect jobs in the United States.

One study by the Congressional Budget Office (CBO) shows that it would directly and indirectly lead to job loss nationwide. These jobs would mostly be located within the federal government and its many contractors, but some jobs may be lost in the healthcare industry and related occupations.

How the Study was Conducted

Analysts with the CBO considered the effects of the repeal of Obamacare on the health insurance coverage and on the federal budget over the next decade. They especially looked at gross domestic product and interest rates, which would be indirectly affected by repeal of this legislation, focusing primarily on changes in tax revenue. They also spent some time looking at the possible effects beyond the next 10 years. It’s important to note that repealing ACA legislation would create issues in three major categories: insurance coverage, Medicare spending, and tax revenues.

Projected Results of Repealing Obamacare

One of the most surprising findings of the CBO study was a projection that repealing the Affordable Care Act will actually increase federal budget deficits by well over $100 billion over the next 10 years. This runs contrary to the claims that many Republicans, including Donald Trump, are making about the costs of the Affordable Care Act to the federal government. In fact, many federal jobs may have to be cut if the ACA is repealed.

Repealing but not replacing the Affordable Care Act would cause the federal deficit to increase by an estimated $353 billion because mandatory federal spending would be fixed at a certain level while certain areas of funding would be eliminated with the repeal of the ACA. However, repealing Obamacare is projected to boost the economy slightly, which would provide the government with $216 billion in indirect tax revenue. Thus, the projected revenue change for the federal government after repeal is a net loss of $137 billion based solely on direct impact.

After 2025

The budget office also made a preliminary prediction about potential effects of repealing the Affordable Care Act after 2025. Projected deficits will increase by higher rates per year. Tax revenue gained by repealing the ACA would increase at a slower rate than the federal budget deficit caused by losing Obamacare-specified funding. The budget office did not come up with a number, but the deficit could be substantial. This could lead to more layoffs of government employees and contractors.

The Growing Number of Uninsured

While the growing budget deficit would be a big problem, there’s another danger that some consider to be an even greater threat: The number of uninsured people is expected to rise dramatically. This is a particular concern to proponents of the Affordable Care Act as uninsured Americans were supposed to be the primary beneficiaries of the law’s various provisions. This is also a concern to the many people who work in healthcare occupations, as the high costs incurred by providers serving uninsured people could lead to layoffs.

Excluding senior citizens, the number of uninsured people in America would top 19 million if the ACA is repealed without provisions for replacement. This rate would continue going up until it reaches 24 million, where it would stay through 2025. It’s important to note that the number of people with health insurance through their jobs would increase by roughly 8 million per year during this time. However, the number of people who purchase their health insurance individually or who are covered through Medicaid would decrease by over 30 million. Many jobs would be lost at low-cost clinics that rely on Medicaid payments.

Impact of Repeal on the Federal Budget

One of the main sources of potential revenue gained from repealing the ACA is the removal of healthcare subsidies included in the legislation. Federal subsidies – which lower the cost of monthly premiums for low- and middle-income families – cost the government $660 billion in 2016. But keep in mind that this revenue increases slower than the increased expenditure projected if the ACA is repealed. The direct effects on federal jobs and indirect effects on other jobs from this aspect of the legislation are estimated to be minimal.

These savings would be offset in part by certain other parts of complex and wide-reaching legislation. Penalties imposed on uninsured people and noncompliant companies generate some revenue, which would be eliminated if the legislation were undone. Also, the greater rate of employer-based health insurance would reduce revenue, as the payments for this type of insurance are usually exempt from taxes. This feature may be good in terms of employment outlook in the private health insurance industry, but overall, repealing the Affordable Care Act without appropriate legislation to replace it appears to be an economically questionable move at best.