In a recent Wall Street Journal opinion piece, Casey Mulligan, PhD, a professor of economics at the University of Chicago, evaluated whether the Patient Protection and Affordable Care Act is actually affordable when its consequences for the wider economy are examined.
Here are five things to know about the impact of the PPACA on the economy, according to the opinion piece.
1. The PPACA diminishes the "economic pie." According to Dr. Mulligan, the health reform law helps low- and middle-income people across the country avoid sacrifices they would have to make to purchase coverage without the tax subsidies provided under the PPACA. However, by eliminating some of the tough sacrifices for that population, society itself has to make sacrifices.
To boost the healthcare industry and provide more Americans with insurance, workers have to be eliminated in other industries. If workers are not taken away from other industries, the other options are to make the workforce bigger or create a more productive workforce, according to Dr. Mulligan.
2. The health reform law will reduce business expansion. Under the PPACA, employers with 50 or more full-time employees are required to provide health benefits for their employees who work more than 30 hours per week. According to Dr. Mulligan, more than 35 million people work for midsize businesses that do not offer health insurance, and many of these businesses will forgo expanding and hiring more employees to prevent incurring penalties for doing so.
3. The PPACA reduces benefits for employees. Almost 25 million people across the nation are employed in a full-time position, which makes them ineligible for assistance with their health insurance premiums under the PPACA. To qualify for subsidies, Mr. Mulligan expects million of workers to switch to a position at a business that does not offer health coverage, stop working, or transfer to part-time status at their current company.
4. The PPACA will make the economy less productive. Businesses, people, and entire sectors will attempt to position themselves to avoid or reduce new tax burdens or to enhance their subsidies, according to Dr. Mulligan. This re-positioning will make the American economy less productive. It will also stifle wage growth, which will have an impact on workers.
For example, because employers with 50 or more full-time employees are required to provide health benefits to employees who work more than 30 hours per week, many businesses have adopted 29-hour work schedules to avoid penalties and to allow employees to qualify for tax subsidies.
5. The PPACA will have a long-term negative impact. Dr. Mulligan estimates the health reform law will result in approximately 3 percent less weekly employment, 3 percent fewer total work hours, 2 percent less gross domestic product, and 2 percent less labor income by 2017 or earlier.
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