- We assess the macroeconomic implications of President-elect Biden’s campaign proposal to modify and expand the Affordable Care Act (ACA), which we believe has a good chance of enactment through the reconciliation process. Because many of the effects of the original ACA would likely recur on a smaller scale, we review the research literature studying the effects of the original legislation. We also compare outcomes between states that did and did not implement the ACAas intended in 2014.
- We find compelling evidence that the ACA increased healthcare consumption and employment, and that it significantly lowered healthcare prices for consumers on average. Twenty-three states chose not to implement the ACA Medicaid coverage expansion in 2014, and the 27 states that did implement the legislation as intended saw a 3pp larger increase in insured population shares (on average, govt. programs). Although some had feared that expansion would raise prices, the healthcare inflation trend actually decelerated by 1.0pp across these 27 states (versus a stable pace elsewhere). Nor was there a visible drain on the healthcare system: Hospital margins actually rose.
- The literature also generally indicates a positive impact of the ACA on quality of care and health outcomes, particularly for lower-income consumers. However, some studies found a reduction of physician time spent with each patient.
- Less positively from an economic perspective, we document a reduction in labor supply among individuals nearing retirement age, probably because they could now obtain affordable healthcare outside of their employers. Biden’s proposed reduction of the Medicare eligibility age from 65 to 60 would amplify that incentive. Nonetheless, the 2010s experience suggests that the net effect of expanding the ACA on medium-term employment would likely be positive.
- As with the original ACA, coverage expansion would likely be financed by some combination of Medicare price cuts, tax increases, and efficiency gains. In terms of medium-term GDP implications, the combined boost from higher healthcare consumption, increased healthcare labor demand, and a healthier and more productive workforce would probably more than offset the drag from reduced labor force participation among the near-elderly. Coverage expansion could also lower the medium-term pace of core inflation by 0.05-0.1pp if it is partially financed by Medicare reimbursement rate cuts.
But Trump has rooned America and the swing back to class remediation is nothing but racism.