NCPA - National Center for Policy Analysis

The Impact of the Patient Protection and Affordable Care Act on Job Creators and the Economy

July 25, 2012

The Patient Protection and Affordable Care Act (ACA) will radically transform the U.S. health care system. Arguably the most radical piece of legislation ever passed by Congress, the law seeks to provide health insurance to many Americans by requiring many employers to provide coverage. This provision, however, threatens the fragile economic recovery in the United States, says John C. Goodman, president of the National Center for Policy Analysis and a research fellow with the Independent Institute.

This is first true when mandated coverage is understood as a raise to the minimum wage. Economists have found that noncash benefits typically substitute dollar-for-dollar with real cash wages. Thus, the cost to the employer of providing coverage will be taken directly from potential wages.

  • The Congressional Budget Office (CBO) estimates the average annual cost of a minimum benefit package at $4,500 to $5,000 for individuals and $12,000 to $12,500 for families in 2016.
  • That translates into a minimum health benefit of $2.28 an hour for full-time workers with individual coverage and $5.89 an hour for full-time employees with family coverage.
  • Thus, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year.
  • Any worker whose productivity level is below this wage will be hard-pressed to find a job.
  • Further, employers will be further incentivized to invest in capital that can perform simple tasks and price low-skilled workers out of the market entirely.

Aside from this impact on the labor market, Americans will also face a new economic burden in the form of taxes. Both direct and indirect (felt through higher prices passed onto customers), these taxes will stifle economic growth.

  • Americans and American businesses will face more than $500 billion in 19 new types of taxes and fees over the next decade to fund health reform.
  • According to the Joint Committee on Taxation, about 73 million taxpayers earning less than $200,000 will see their taxes rise.
  • Additionally, the law's tax on medical devices will cost 45,661 jobs across that industry alone, according to former chief Labor Department economist Diana Furchtgott-Roth.

Source: John C. Goodman, "The Impact of the Patient Protection and Affordable Care Act on Job Creators and the Economy," testimony before the U.S. House Committee on Oversight and Government Reform, National Center for Policy Analysis, July 10, 2012.

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