What Would Happen to the Economy if Obamacare Were Repealed?

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Health and Human Services Director Kathleen Sebelius has been embattled since the rollout of Obamacare. Credit: United States government.

Health and Human Services Director Kathleen Sebelius has been embattled since the rollout of Obamacare, with Republicans calling for repeal of the law. Image courtesy of United States government.

Every so often, we pass laws repealing human nature — Howard Lindsay.

On the eve of the October 1 rollout of the  Patient Protection and Affordable Care Act, Democratic strategists were reveling in the blame the Republicans were receiving for the impending federal government shutdown and were counting the seats likely up for grabs as a result in Congress.

A few weeks later, a botched rollout and a political fiasco over assurances made by the president have not only completely reversed the situation, but threaten to undermine the very fabric of the law itself — if not Obama’s presidential legacy.

How has Obamacare affected the economy so far, and what would happen if the PPACA were repealed at this late date?

Political Divisiveness Over the Affordable Care Act

Obamacare is the law of the land. Both houses of Congress passed the Patient Protection and Affordable Care Act, and President Barack Obama signed it into law in 2010. Challengers later alleged Obamacare was unconstitutional, but the Supreme Court affirmed the constitutionality of the PPACA in 2012. Noteworthy in the passage of the measure was the lack of Republican support: At the time the bill became law, Democrats controlled both houses of Congress. Shortly thereafter, Republicans wrested away power in the House, ultimately making dozens of unsuccessful legislative efforts to delay or repeal the law.

Many pundits considered President Obama’s re-election in 2012 as evidence that Obamacare had the support of the electorate. However, poll numbers taken after election night suggested underlying discord, as 49% said they felt the law should be at least partially repealed, versus 41% who believed it should remain or be expanded. The crux of the argument against the program was the belief that the federal government is overreaching by mandating something better determined by the free market and individual choice.

Without question, the inept rollout of Obamacare on October 1, coupled with the political fallout over Obama’s broken ‘promises’ regarding the ability to keep current policies already in force, have seriously undermined the president’s signature legislative achievement. According to recent Gallup polls, 55% now disapprove of the law, although the number who believe it should be fully repealed is significantly less than that.

Health Care Spending in the United States

Without question, medical costs in the United States have exploded over the past half-century. In 1960, overall spending on health care was 4.6% of GDP; by 2011, they had increased to 16.4%. Health care had become one-sixth of the U.S. economy, and with the baby boomers reaching retirement age, the cost increases were quickly becoming unsustainable. As opined in a Forbes piece from 2011, “Health costs are by far the biggest threat to the nation’s fiscal health in the long run.”

Enter Obamacare. The architects of the program believed that they could accomplish the duel purposes of adding more people to the insurance rolls (14 million in 2014 alone) while bending the cost curves in a meaningful way. At present, despite spending more money on health care than any other country, life expectancy is just 27th highest in the world at 78.2 years.

Obamacare’s Current Impact on the Economy

Although the early information is preliminary, the onset of Obamacare has, so far, been a net negative to the economy. Specifically, employers have become measurably cautious about hiring and capital expenditures due to the uncertainty the law has created. The Federal Reserve’s Beige Book report on October 16th made ten references to the Affordable Care Act, including the following:

“Several Districts reported that contacts were cautious to expand payrolls, citing uncertainty surrounding the implementation of the Affordable Care Act and fiscal policy more generally.”

“In regard to hiring and capital expenditure plans, firms continued to expand cautiously, as they face ongoing uncertainty from the federal government shutdown and implementation of the Affordable Care Act.”

“Overall, most bankers remained optimistic, although they expressed uncertainty on behalf of their business customers and for themselves over the implications of both the Affordable Care Act and a prolonged government shutdown.”

No one has reliably quantified the dollar amount or percentage impact to the overall GDP to date, but based upon the Federal Reserve’s own admissions, Obamacare has added significant uncertainty to an already-fragile economy. Furthermore, that report was written before the furor over the botched web site and the policy cancellations fiasco had reached their current fever pitch. The latest problems have increased calls for the law to be delayed, if not outright repealed – but what then?

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