In its first three quarters of 2014, the Affordable Care Act has contributed positively to GDP growth while exerting downward pressure on both Medicare costs borne by the Federal government and the unit costs for healthcare services. Though the subject of some debate, even state Medicaid expansions are credited with creating jobs while increasing the percentage of people with health insurance. These results must come as a shock to conservative economists, who argued as recently as July 2014 that the ACA would impede growth and be a drag on the economy.
Conservative economists, such as Casey Mulligan and Greg Mankiw, argued as recently as July 2014 that the ACA would reduce potential GDP by as much as 2%, as it allegedly would function as a “hidden tax” that discourages labor.
Data from the first three quarters of 2014, however, reflecting the implementation of the ACA, shows that healthcare services were a significant positive contributor to GDP growth—specifically from an increase in expected spending on healthcare services among the newly insured. Furthermore, a decrease in expected Federal Medicare costs is at least partially attributable to changes to the program mandated by the ACA, while prices for healthcare services increased by less than overall inflation for the twelve months ended in October 2014.
In North Carolina, a state that has not yet chosen to expand Medicaid, a George Washington University study argues that the proposed expansion, as proscribed by the ACA, would create 43,314 jobs by 2020 while covering up to 300,000 uninsured people in 2016. While Modern Healthcare questions the potential for Medicaid expansion to create healthcare jobs, even it admits:
”In the 12 months that ended in November, healthcare employers added 261,200 jobs for growth of 1.8%. That growth was generated during the first year of insurance expansion under the Patient Protection and Affordable Care Act. The newly insured are expected to fuel accelerated healthcare spending after several years of historically slow growth, and hiring growth is one indicator of faster increases in spending.”
In summary, thanks to the ACA, more people have healthcare coverage, an increase in gross healthcare spending is contributing to positive GDP growth, Medicare reforms are tempering the expected increases in the costs of the program, healthcare prices increased slower than inflation, and Medicaid expansion has arguably contributed to job growth in states that adopted it. Even if you discount the positive economic impact of ending “job lock” and encouraging entrepreneurship, the ACA is a big win. At least the conservative economists, who are eating crow, have access to health insurance that will cover any resulting indigestion.