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Urban Institute: ACA will help healthcare, but not overall economy

The Patient Protection and Affordable Care Act will have little net effect on overall employment but should provide a modest boost in healthcare sector employment, according to the Urban Institute.

The organization's new report, “How Will the Affordable Care Act Affect Jobs?”, contradicts claims that the new law would place an undue burden on individual business owners, causing them to reduce their labor force.

“It is almost impossible for the ACA to have a significant effect on the overall economy or on unemployment simply because the effect of net new federal spending on healthcare (over and above reductions on spending on Medicare and other government programs) is very small relative to the size of the economy,” said study authors John Holahan and Bowen Garrett.

According to the study, the total increase in spending under health reform for the period 2010-2019 amounts to 0.25 percent of the Gross Domestic Product, an amount too small to have an effect on the overall economy.

In the healthcare sector, the study indicates that total net employment should see modest increases as a result of the ACA – and should also lead to wage increases.

“The expansion of health insurance coverage through new Medicaid coverage and income-related subsidies will increase federal spending on healthcare ($938 billion over 10 years, mostly from 2014 through 2019). This will result in increased demand for labor in the health sector, including increasing use of medical equipment, new technologies and pharmaceuticals and could lead to wage and salary increases in the health sector,” the authors said.

While healthcare wages may increase over the next few years, the total number of people employed in the sector should also see a jump as a result of the ACA, the study says, though it won't be as significant as some might think. Specifically, the report notes factors that would lead to greater demand for healthcare services, including greater numbers of people with health insurance, will likely be offset to some extent by other forces resulting from health reform, such as cost-containment.

“Spending reductions in Medicare and other government programs will partially finance health reform,” said Holahan and Garrett. “These reductions will have the opposite effect, reducing the demand for labor and the purchase of services and equipment in the health sector. The net effect, however, will be positive – higher net spending on healthcare services and more employment in the health sector.”

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