Last summer the President's Council of Economic Advisers (CEA) released a report claiming that Obamacare would create jobs and stimulate economic growth through an infusion of federal dollars to expand Medicaid.
The reality is, Obamacare enrollments may be up, but the number of Medicaid providers is way down. Meanwhile, growing numbers of schools, for example, report they cannot afford the high coverage costs of teachers, putting their jobs at risk.
For all the seeming wisdom of this “priming-the-pump” logic, the CEA’s argument is more superficial than substantive. For starters, the federal government doesn’t “earn” the cash it’s doling out. Federal dollars come from taxpayers. All the federal government does is redirect those dollars to its preferred programs.
The American Action Forum’s Robert Book analyzed the CEA report, along with numerous state-level reports claiming similar economic benefits from Obamacare’s Medicaid expansion, and found that:
These studies…all use similar methodologies. They arrive at their results by ignoring necessarily offsetting factors [starting with the taxes that have to be paid to finance the Medicaid expansion], and thus their claims are unfounded. …Expanding Medicaid may have many effects; however, we find that increased employment and economic activity are not among them. Instead we find that Medicaid expansion, if adopted by all states, would result in a direct net loss of up to $174 billion in economic growth nationwide over ten years, and would result in the loss of over 206,000 full-year-equivalent jobs for the years 2014 to 2017.
Those losses are in addition to the already staggering annual costs of subsidizing Obamacare and Medicaid. CNSNews.com’s Terence P. Jeffrey reports that according to the latest Congressional Budget Office (CBO) estimate:
The cost of the Obamacare subsidy that the U.S. Treasury will pay on behalf of people who earn under 400 percent of the federal poverty level [$46,680] and who buy a government-approved health-care plan on a government-run health-insurance exchange will increase by approximately 8-fold in its first ten years of operation…Medicaid spending will double in the first ten years of full implementation of Obamacare.
Last year, before the exchanges went into effect, federal Medicaid spending was $265 billion, and over the next decade the CBO projects spending will more than double to $539 billion. Obamacare subsidies will increase nearly eight-fold over a corresponding period starting this year, from $17 billion to $134 billion (also here, p. 12).
There are better ways to provide quality healthcare to those who need and want it, but who cannot afford it. Combined, Obamacare and Medicaid spending in 2015 will amount to $378 billion growing to a combined $673 billion in 2023 (here, p. 12). According to the Census Bureau, 15 percent of all Americans have no health insurance, nearly 46 million people.
Simply taking that 46 million figure at face value, assuming all those people truly cannot afford health insurance and want it, based on the CBO’s projected spending levels, that works out to nearly $8,300 per individual growing to almost $15,000 per individual in 2023—a 78 percent increase in spending. Yet right now the annual premium for single coverage averages $6,025.
A better approach to long-term affordable health insurance would be to direct any public subsidies to low-income individuals directly in the form of health savings accounts (HSAs). With those funds, people could purchase the health insurance that works best for them. At the same time, restrictions on insurance providers should be removed to encourage competition that helps keep quality high and costs low for everybody.
What’s more, by encouraging competition and innovation in healthcare, there will be a greater variety of plans for individuals and families to choose from, which helps ensure that people can purchase a plan that fits their unique needs without breaking their budgets.
Best of all, promoting individual healthcare choice and competition doesn’t have the adverse economic effects of government command-and-control healthcare.