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White House’s new claim: PPACA helps U.S. economy grow

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(Bloomberg) — Obamacare is a boon to the U.S. economy, President Barack Obama’s top economic adviser said in a speech aimed at changing the tone of debate over the effects of the Patient Protection and Affordable Care Act (PPACA), though he offered little direct evidence.

By expanding insurance coverage, providing subsidies for premiums and helping slow the growth of health care costs, the president’s signature legislative achievement has put money in Americans’ pockets, Jason Furman said Thursday. Liberals should make an aggressive argument for the law’s economic benefits, said Furman, the chairman of Obama’s Council of Economic Advisers, speaking at the Center for American Progress.

See also: Earnings: More PPACA impact news drips out

“We can do a whole lot better than, ‘our policies didn’t hurt the economy while doing all these great things,’” Furman said. “In fact, they actively helped the economy, and they did it not while doing all these great things, but because of what they did in terms of coverage, in terms of cost and in terms of quality.”

Furman’s argument for the health care law’s economic benefits boiled down to four main points:

  • Healthier workers are more productive workers — and by expanding coverage, Americans will be healthier, Furman said. He depicted this as a future benefit of the law, and provided no evidence that the health of the U.S. workforce has already improved since the law’s coverage expansions in 2014.

  • Workers who are freed to change jobs because they no longer have to worry about retaining health insurance, a phenomenon called “job-lock,” will have higher lifetime earnings. Furman provided no evidence that job-lock has been reduced under PPACA, again depicting this as a future benefit.  

  • PPACA helped reduce the growth of U.S. health care spending, a claim the Obama administration has made before. Spending grew 3.8 percent in 2009, the year before the law was passed — 2.5 percentage points slower than in 2007 — and growth has remained low ever since.

  • Expanded insurance coverage and tax credits provided to middle-and low-income Americans to reduce their insurance premiums have acted as something of an economic stimulus, both increasing demand for health services and freeing up cash consumers can spend on things other than health care. Furman said there is direct evidence of this effect, though it is complicated. Employment in the health care industry accelerated in 2014, corresponding with PPACA’s expansions of coverage. Health care job growth was greater in states that reduced their uninsured populations the most, implying that the employment increase is linked to insurance coverage. Furman said about 130,000 health care jobs were created nationwide, thanks to the law.

Job growth

The Altarum Institute has found that states that expanded Medicaid, the program for low-income people, didn’t see greater gains in health care employment last year compared with states that chose not to expand. Charles Roehrig, a vice president at the institute, wrote in an e-mail that Furman’s work may show that states that have expanded insurance coverage the most, whether by Medicaid or private insurance, “have had somewhat faster job growth.”

See also: Assurant dishes on PPACA effects

“This is probably a sound conclusion,” he said.

Hard to parse

Economists have had difficulty parsing out how much of the slowdown in health care spending is related to the recession that ended in 2009 and how much results from other elements, including PPACA. The reasons for the reduced pace “may not ever be fully understood,” Furman acknowledged. Nonetheless, he attributes about half a percentage point of the annual decrease to the health law, mainly due to cuts in payments for hospitals and other services through Medicare, the program for the elderly and disabled.

Altarum’s Roehrig said Medicare payment policies “can claim some credit” for slowing costs in that program but that 60 percent of the broader reduction in health care spending is connected to the economy.

“Much of the rest,” he said, is “explained by some temporary factors not linked to the recession.”

Douglas Holtz-Eakin, a conservative economist who heads the American Action Forum, an advocacy group that opposes PPACA, rejected Furman’s argument.

U.S. worker productivity isn’t increasing, which would be expected if people are healthier under PPACA, he said. The argument that expanded coverage and insurance subsidies increased demand for services “ignores where our money comes from,” because those benefits are paid for in part by higher taxes, which reduce economic demand, Holtz-Eakin said.

A footnote in Furman’s prepared remarks tacitly acknowledges this, saying that “the effects of the law as a whole could be somewhat smaller.”

‘Just desperate’

“There’s nothing about a trillion dollars of new spending, $500 billion in new taxes and $50 billion in regulatory costs that is pro-growth,” Holtz-Eakin said. “To claim otherwise is just desperate.”

One area in which Furman and Holtz-Eakin are in agreement: the causes of the slowdown in health care costs aren’t well understood.

“We don’t know” if PPACA helped, Holtz-Eakin said. “The honest truth.”

See also: PPACA: Not much effect on employers’ fourth-quarter earnings