David M. Cutler
January 2011
The imminent effort in the House of Representatives to repeal health care reform is a major step
in the wrong direction if promoting economic recovery is job one.
The new House leadership proposes to repeal the new health care reform law formally known as
the Patient Protection and Affordable Care Act of 2010 and the subsequent Health Care and
Education Reconciliation Act of 2010. That combined legislation guarantees health insurance
coverage to all Americans and promotes significant cost reductions in public and private medical
care programs. It is the culmination of 70 years of effort by Democrats and Republicans alike.
A successful repeal of health care reform would revert us back to the old system for financing
and delivering health care and lead to substantial increases in total medical spending. The
consequences of this spending increase would be far reaching. It would hurt family incomes,
jobs, and economic growth.
Repealing health reform would:
- Increase medical spending by $125 billion by the end of this decade and add nearly
$2,000 annually to family insurance premiums - Destroy 250,000 to 400,000 jobs annually over the next decade
- Reduce the share of workers who start new businesses, move to new jobs, or otherwise
invest in themselves and the economy
This memo will review these effects in more detail with a particular focus on jobs.
High medical spending harms employment and economic
growth
Before getting to the effects of repeal let’s look at how health costs affect the economy. Health
insurance costs are a major issue for Americans. Family health insurance premiums have
increased 80 percent in the past decade after adjusting for inflation, while median income has
fallen by 5 percent.1 This is among the reasons why American families are increasingly uneasy
about the economy. Businesses are worried as well. Small businesses have consistently ranked
the cost of health insurance as their number one problem since 1986.2 Finally, rising medical
costs are the major contributor to the long-run federal deficit, and they hamper state and local
governments, too.