Monday’s Congressional Budget Office (CBO) independent report on Speaker Paul Ryan’s American Health Care Act was shocking to say the least.
Rightfully, all the controversy centered on the projected 24 million fewer Americans having health insurance in the next 10 years compared to simply leaving the Affordable Care Act (ACA) in place. Deficit hawks were giddy that the CBO also projected that Ryan’s bill would result in a $337 billion reduction in the federal deficit by 2016.
What was missing from the CBO report was the possible impact this Obamacare replacement plan would have on the nation’s small businesses and economy.
So what would Ryan’s health insurance reform bill mean to small businesses?
- Clearly small businesses will have more of their employees without health insurance thus hurting productivity.
- The Ryan bill eliminates the ACA’s small business tax credits, the only provision in the ACA that helped small businesses afford to offer group health insurance.
- The Ryan bill does eliminate the requirement that businesses with 50 or more employees have to offer group health insurance. The South Carolina Small Business Chamber never supported the employer mandate provision in the ACA but eliminating it would only benefit a very, very small percentage of businesses.
What is missing from the CBO report is a macroeconomic analysis of how Ryan’s bill would impact the local and state economies.
The CBO did not do a macroeconomic analysis they say “because of the very short time available to prepare”. Apparently such an analysis is required by the rules of the House.
Hopefully the CBO will now do this critical missing part of its report and hopefully it will include these basic principles of a macroeconomics analysis:
- Direct Economic Effects: A change in expenditures by the industry directly impacted by the change in policy.
- Indirect Economic Effects: A change in expenditures by industries that supply goods or services to the directly impacted industry.
- Induced Economic Effects: A change in expenditures by households for which income is changed by the direct and indirect activity—for example, the rippling effect of fewer healthcare workers spending their paychecks on other goods and services.
A comprehensive macroeconomic analysis is essential since the CBO predicted that the federal deficit will be reduced by $337 billion over 10 years. That is basically pulling $337 billion out of the nation’s local economies in terms of reduced healthcare services by providers.
A collection of reports released in recent weeks indicates that repealing those pieces of the ACA (the Medicaid expansion and subsidies for private insurance), which contribute massively to state and local economies, would remove millions of jobs and contract economic activity across states—making ACA spending reduction a move that’s bad for both individual families and the broader national landscape. Although these studies cannot predict what form the Republican replacement plan will take, they do show that any plan that includes curbing Medicaid and private-insurance subsidies has a steep hill to climb when it comes to making up for those economic losses. (The Atlantic, March 10, 2017)
Small businesses thrive when there is good demand for their goods and services. Ryan’s bill would clearly reduce the amount of money flowing through our local, state and national economies that contributes to this consumer demand.
Critics of Obamacare like to point to the largely “fictional” problems it causes for small businesses as justification for repeal and replace.
These same critics should be equally concerned about the “real” problems Ryan’s American Health Care Act would create for our small businesses.