Writing at Fiscal Times Jacqueline Leo reports on the prospective economic impact of the PPACA. At this point it strongly appears that it will help a very few people and hurt a lot more, particularly those who are healthy and under age 40, categories with substantial overlap. She concludes:
If even a fraction of the middle class and upper middle income earners divert some of their discretionary dollars to pay for health care, it will have a significant impact on consumer spending. What will that mean for the economy? Consumer spending accounts for about 70 percent of the nation’s GDP, although experts say that number is likely to decline.The top 20 percent of income earners account for about 40 percent of all spending in the U.S. When you increase the costs of health care and the new taxes associated with Obamacare, you can hear the wallets closing.
Not all of the effects will be adverse. For example, it may result in more entrepeneurs starting their own businesses than might otherwise be the case. Contrary to what you might think they’re not all Young Turks. More are over 40 than under and the increased availability of healthcare for individuals through the exchanges could potentially be an inducement to take a flyer.
But many of the effects will. Rather than thinking in terms of “consumer spending”, think more concretely. The dollar that is spent on healthcare insurance is a dollar that won’t be spent on cars, houses, or iPhones. Our economy is very dependent on consumer spending by people who are under 40 and one consequence of the PPACA is there is likely to be less of that than there otherwise might be.
And again, contrary to what you might think, the PPACA will not result in a transfer of income from rich to poor but from young to old and, more precisely, from all other sectors of the economy to the financial and healthcare sectors, both sectors that create fewer jobs per dollar of GDP.
CEOs have already voiced concerns about how higher taxes and HC costs may negatively effect the bottom line of this current Christmas spending. Also, there remains a lack of confidence in small business owners about what to expect from the Obama administration in rules, regs and Obamacare costs. The fact that the WH seems to adjust dates and mandates on the PPACA at will, just puts more breaks on business trying to look into the crystal ball and project costs over the next few years. This is another by-product of an administration having no business experience, savvy or understanding, leading them to unworkable policies in stabilizing and/or growing the economy.
You forget the large body of research showing that the working poor are the most adversely affected by illness, often losing jobs due to illness. With care available, these people may have increased productivity. It is also unclear to me if it transfers money from young to old. Link goes to KFF summary of who does not have health insurance. It is mostly younger people. Most of those will be eligible for subsidies. Also, the Medicare cuts from the elderly will go towards insurance for younger people. I think there will be a transfer from the healthy to the sick, and since the sick tend to be older, we will see a transfer on the spending side, but I havent seen estimates including the revenue side. The investment tax is probably not coming from young people and neither is the Cadillac tax.
http://kff.org/uninsured/report/the-uninsured-a-primer-key-facts-about-health-insurance-on-the-eve-of-coverage-expansions/
http://www.cbo.gov/sites/default/files/cbofiles/attachments/43471-hr6079.pdf
Steve
That could help, Steve. On the other hand the recent study that found that Medicaid didn’t do much to improve the health of recipients is evidence in the other direction. Remember that under the new rules many more of the working poor will be covered under Medicaid.
There are relatively few studies that “show” Medicaid does not improve outcomes. They are all statistically weak. There are a lot more showing that it improves outcomes. Some of those are weak also, but there are some decent ones. If you are referring to the Oregon study, it was severely underpowered. Their diabetes patients started out with unusually well controlled Hb A1c’s. I know Avik Roy pushes this a lot, but he usually backs off when someone who knows the data confronts him.
Steve