This research brief from the University of California Berkeley Center for Labor Research and Education estimates the economic losses in California from a repeal or re-funding of the key sections of the Affordable Care Act (ACA). An estimated 3.7 million Californians enrolled in expanded Medicaid (MediCal) would lose that coverage, and another 1.2 million individuals enrolled through California’s state health insurance marketplace, Covered California, would lose federal subsidies to make private health insurance more affordable. These two sections of the ACA have been the largest drivers of the historic reduction in California’s uninsured rate from 17.2% in 2013 to 8.6% in 2015.
California would lose approximately $20.5 billion in annual federal funding for the Medi-Cal expansion and Covered California subsidies. The economic losses associated with these lost federal dollars would be partially offset by limited economic gains from other provisions that may be included as part of the repeal of the ACA, which could yield $6.3 billion in tax cuts to California insurers and high-income households and nearly $1.3 billion in eliminated penalties for uninsured individuals and employers not offering affordable coverage.
The reduction in federal health insurance funding would lead to the loss of approximately 250,000 jobs in California, which would be slightly offset by the addition of 20,000 jobs due to the tax cuts for high-income households, 11,000 jobs due to the elimination of the fee on insurers, 8,000 due to the elimination of the penalty for large employers not offering affordable coverage, and 2,000 jobs due to the elimination of the penalty for the uninsured. The net effect of partial ACA repeal would be the loss of 209,000 jobs in California.
The majority (135,000) of these lost jobs would be in the healthcare industry, including at hospitals, doctor offices, labs, outpatient and ambulatory care centers, nursing homes, dentist offices, other healthcare settings, and insurers. But jobs would also be lost in other industries. Suppliers of the healthcare industry, such as food service, janitorial, and accounting firms, would experience reduced demand, leading to job loss. Some California counties would be especially adversely affected by partial ACA repeal because they have a higher-than-average share of their population enrolled in the MediCal expansion. For example, there would be 63,000 jobs lost in Los Angeles County; 12,000 jobs lost in San Bernardino County; 6,000 jobs lost in Fresno County; and 5,000 jobs lost in Kern County.
The state also would lose an estimated $1.5 billion in state and local tax revenue from the partial repeal of the ACA. Federal funding for MediCal and Covered California subsidies supports jobs in the healthcare industry and at healthcare suppliers, and the income that these workers spend locally supports jobs in a variety of industries. The Californians who hold these healthcare, restaurant, insurance broker, and other jobs pay state income and sales taxes. The federal spending also increases the state’s corporate profit tax revenues, along with some other smaller taxes and fees.
Finally, there is an overall economic multiplier effect from these massive changes in health insurance coverage, tax revenues, and job losses. The combination of the direct effect on the healthcare industry, the indirect effect on suppliers, the induced effect of reduced spending by affected healthcare workers in their communities, and the induced effect of increased spending by individuals affected by the tax cuts and elimination of penalties would result in a total loss of more than $20.3 billion in GDP throughout the state.
This analysis was conducted using national level Congressional Budget Office estimates, applied to California, using economic data from IMPLAN Online 2015. Some of the provisions that would be included under ACA repeal would be eliminated immediately, while the effective date for other provisions would be delayed. For simplicity, the effects are modeled as if they all take place in 2017, and results are presented in 2017 dollars.
Funding for the research brief was provided by The California Endowment.
The Labor Center also has prepared fact sheets describing these economic impacts for the 14 California counties most impacted.