Methods: California could lose 269,000 jobs if the ACA is overturned

Laurel Lucia

Read full blog post, California could lose 269,000 jobs if the ACA is overturned (October 15, 2020)

This analysis is conducted using IMPLAN, an industry-standard input-output economic modeling software package, and follows a methodology that is similar to that of analyses the Labor Center published in December 2016 and September 2017 on the economic consequences of ACA repeal.

This analysis uses IMPLAN data from 2018, reflecting the pre-pandemic economy. To test the sensitivity of these economic impact estimates to changes in the economy related to the pandemic, I also ran this analysis using a COVID version of IMPLAN reflecting the economy in the second quarter of 2020. If the state’s economy in 2022 continued to resemble the economy in the second quarter of 2020, California would lose an estimated 253,000 jobs under ACA repeal, or 16,000 fewer (6%) than if the 2022 economy more closely resembled the 2018 economy. This difference in part reflects the high average personal savings rate in the second quarter of 2020 due to quarantine and economic uncertainty, which reduced the induced effects associated with reduced health care spending. While California’s economy is projected to only partially recover by 2022, the unemployment rate projected for 2022 (6.6%) is projected to be closer to the 2018 rate (4.3%) than the 2020 second quarter rate (15.1-16.2%). Therefore, 2018 data were used as the basis for the analysis but the economic impacts could vary from these estimates somewhat depending on the extent to which the economy recovers by 2022 and consumption and employment patterns return to pre-pandemic patterns.

I focus on the economic impact of the change in federal spending and tax revenues because these dollars are coming from outside the state’s economy (or are leaving the state economy) and the changes in federal spending and tax revenues are relatively predictable. However, this analysis does not include other potential effects on the economy, either positive or negative, that are more difficult to predict and model. This analysis does not include:

  • the projected loss of coverage and subsequent reductions in consumer health spending related to repeal of the employer mandate and protections for people with pre-existing conditions;
  • the potential economic harm from reduced productivity among workers who would become uninsured if the ACA is overturned;
  • measurement of the economic effects of any increases in medical debt, medical bankruptcy, or other financial insecurity among households that would lose coverage under repeal; or
  • any long-run effects of a projected reduction in the federal deficit under repeal.

The projected reduction in federal health care spending modeled in this analysis was based on projected federal Medi-Cal expansion spending in budget year 2020-2021 and 2019 premium subsidies through Covered California published by Kaiser Family Foundation, both inflated to 2022.

Eight percent of lost federal Medi-Cal spending and 14 percent of federal spending on Covered California premiums was allocated to IMPLAN Sector 444 “Insurance Carriers, Except Direct Life” to reflect administrative spending in Medi-Cal and in the average California individual market plan.

Fourteen percent of the non-administrative spending is removed from the analysis to reflect spending on drugs and durable and non-durable medical equipment, since those types of health care spending are likely to have a smaller economic impact locally compared to other health care spending which tends to be more local and pays for services that are more labor-intensive. This assumption, based on CMS State Health Accounts data from 2014, is conservative given that these types of health care spending have some impact on all local economies (supporting pharmacist and pharmacy technician jobs, for example) and that a number of drug companies are based in California.

The remaining health care spending is distributed across the following nine IMPLAN sectors:

483 Offices of physicians

484 Offices of dentists

485 Offices of other health practitioners

486 Outpatient care centers

487 Medical and diagnostic laboratories

488 Home health care services

489 Other ambulatory health care services

490 Hospitals

491 Nursing and community care facilities

The distribution of this health care spending is weighted across these nine sectors according to the relative share of spending in these sectors in California using IMPLAN.

The largest ACA tax provisions that would be repealed if the law was overturned in its entirety include the Additional Medicare Tax and Net Investment Income Tax on high-income households, the requirement that large employers offer affordable health insurance to their full-time employees or pay a penalty, and a tax on pharmaceutical manufacturers and importers. To model the repeal of the tax cuts and penalties, I start with national Joint Committee on Taxation and Congressional Budget Office estimates of the reduced federal revenues in 2022 and then estimate the share of revenues that would have otherwise come from California. The repeal of the high-income taxes is modeled as a household income increase for California households with income over $200,000. The repeal of the employer mandate is modeled as an increase in labor income. The repeal of the pharmaceutical manufacturing tax is modeled as an increase in revenues for related IMPLAN Sectors 171-174.

The estimate of lost health care jobs statewide is distributed by county and congressional district based on enrollment data from the Department of Health Care Services by county and congressional district and from Covered California. The estimate of jobs gained due to the repeal of the taxes and penalties is distributed based on population.