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CBO: Killing PPACA Could Have Mixed Results

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Repealing the Patient Protection and Affordable Care Act of 2010 (PPACA) could hurt the U.S. economy in some ways and possibly help in others.

Douglas Elmendorf, director of the Congressional Budget Office (CBO), today delivered that assessment in written testimony prepared for the Senate Budget Committee.

Elmendorf testified at hearing on the economic outlook for 2012 and 2013.

Elmendorf Elmendorfacknowledged that some want to change U.S. health policy by repealing PPACA.

“CBO has not estimated the effects of such actions on the economy over the next two years,” Elmendorf says in the written testimony. “Such an analysis would be difficult and highly speculative because many of the provisions of that legislation will not go into effect until 2014, and so, much of the legislation’s economic impact in the next two years will stem from businesses’ and people’s expectations and uncertainty about what will happen if and when the legislation is fully implemented.”

Some provisions in the act could increase demand for health care services by expanding the number of people with health coverage, but others could cut Medicare payment rates for some health care services, Elmendorf says.

Coverage expansion could increase spending on health care, but the Medicare reimbursement cuts could reduce the incentives for individuals and companies to make some kinds of health care industry investments, Elmendorf says.

“Whether the net effect of those aspects of the legislation is higher or lower investment in the health care industry during the next few years is unclear, and therefore whether repealing or modifying the legislation would raise or lower such investment in the near term is unclear as well,” Elmendorf says.

Keeping PPACA or repealing it could affect investment and hiring outside the health care industry, by changing businesses’ expected spending on health benefits, but any changes would probably simply affect the percentage of their compensation spent on health benefits, not overall labor costs, Elmendorf says.

“Therefore, CBO does not expect that the legislation will have a large effect on investment and hiring outside the health care industry during the next two years,” Elmendorf says.

In the coming decade, PPACA could reduce the amount of labor used in the economy by about 0.5%, or the equivalent of the time of 800,000 full-time workers, by reducing the amount of labor that workers choose to supply, Elmendorf reports in a footnote.

CBO analysts believe much of the reduction will come from employed workers working fewer hours, Elmendorf says.

“The reduction in the amount of labor used in the economy is largely attributable to the substantial expansion of Medicaid and the provision of subsidies that will reduce the cost of health insurance for some people,” Elmendorf says.

Elmendorf also talks about the effects of PPACA repeal on overall economic uncertainty. He says the problem with predicting the effects on the uncertainty level is that repealing PPACA would reduce some types of uncertainty but increase others.

Statement of
Douglas W. Elmendorf
Policies for Increasing Economic Growth and
Employment in 2012 and 2013
before the
Committee on the Budget
United States Senate
November 15, 2011


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