Ditch Obamacare? Not as simple it sounds

“Obamacare must be repealed and replaced.” At least that's what the president-elect and the Republican Congress are saying.

Since the Affordable Care Act (also known as Obamacare and ACA) has been in place for some time, any replacement must account for the impacts of repealing the law. Unfortunately, this massively complicated program may not be easy to replace without imposing significant costs on a wide variety of individuals, businesses, and even governments.

The biggest problem facing those looking to repeal and replace the ACA is how to create a program that doesn’t cause people to lose their insurance.

Since the ACA began, the percentage of people without health insurance has been cut nearly in half.  It has subsidized insurance costs for millions of Americans.  A full repeal would likely price out most if not all of those who currently receive subsidized insurance, and could lead to 22 million to 29.5 million losing their health insurance.

Failure to provide a mechanism to keep the currently insured on the rolls would have significant impact on a wide variety of health providers.  The uninsured would still seek health care, but their costs would now be largely un-reimbursed by insurance companies. 

Over 10 years, the lost income would likely exceed $1 trillion, with hospitals suffering a significant portion of that decline. Taxpayers, the insured, insurance companies, and providers of health-care services and goods would share in the loss.

And the uninsured would bear significant costs through either higher out-of-pocket payments or, more critically, diminished health. Businesses would suffer reduced productivity from a less-healthy worker population. Over time, treatment costs would surge as a growing number of people developed greater health problems. 

Indeed, a Commonwealth Fund study concluded: “Repeal results in a $140 billion loss in federal funding for health care in 2019, leading to the loss of 2.6 million jobs (mostly in the private sector). ... A third of lost jobs are in health care. ... If replacement policies are not in place, there will be a cumulative $1.5 trillion loss in gross state products and a $2.6 trillion reduction in business output from 2019 to 2023.”

Worse, the impact is greatest in those states where providers and health care-related firms concentrate, as well as those areas with significant numbers of lower-income households – such as the Philadelphia region. 

Of the estimated 2.6 million jobs lost, it is projected that 137,000 would be in Pennsylvania. Only California and Texas would lose more.  Between 2019 and 2023, that would mean a decline in Pennsylvania state product of $76.5 billion and $2.4 billion less in taxes. 

On the other hand, repealing the ACA reduces government expenses. The federal insurance subsidy is costly. Repeal would save between $1.5 trillion and $1.75 trillion over 10 years, including the positive impact from employees working longer because insurance mandates are lifted.

Those huge savings, though, are fool's gold.

In one of their dumber political decisions, to attract Republican support for the law, the Democrats added a variety of taxes and penalties to make the ACA pay for itself. The bill got no votes from Republicans. It did, however, create a lot of anger on the part of those individuals and businesses that had to bear the burden of the taxes, mandates, and rising insurance costs -- even if most of those increases had little or nothing to do with the ACA. 

The Affordable Care Act raises large amounts of money, which means repealing it has revenue implications. The 10-year tax-revenue losses and added health costs are estimated to total about $1.9 trillion.  A full repeal would add about $250 billion to the deficit over the decade. Repealing Obamacare could actually cause the deficit to widen somewhat, not narrow.

So let’s summarize:  A full repeal of Obamacare would remove about 25 million people from the insurance rolls; reduce employment; impose higher costs on health-care providers; reduce worker health and productivity, and expand the budget deficit.

And if that were not enough, the Philadelphia regional economy would bear a relatively large share of the burden. 

Undoubtedly, a health-care insurance strategy better than Obamacare can be created.  However, it will not be as easy as those who want to replace the ACA have led us to believe. 

Note: For this column, I referenced studies by the Committee for a Responsible Federal Budget, the Milken Institute School of Public Health/the Commonwealth Fund, the Urban Institute, and the Federation of American Hospitals/the American Hospital Association.