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ASU study: Repealing Obamacare could cost Az 29,000 jobs

An outright repeal of the federal Affordable Care Act, commonly known as Obamacare, would cost Arizona about 29,400 health care jobs next year — and could throw the state’s healthiest economic sector into a one-year recession, an Arizona State University economist said Wednesday.

“Health care is one of Arizona’s most dynamic industries, accounting for one of every five new jobs since 1995, an industry that has added jobs consistently even through recessions,” said Lee McPheters, a research professor of economics at the W. P. Carey School of Business at ASU.

“As a result of the loss of federal funding, we will see our first annual decrease in health care employment since record-keeping began (in 1965),” he said.

The job losses could be as high as 62,659 in 2018, when you consider all the “multiplier” jobs that count on health care, such as medical equipment suppliers and food services, McPheters' report said.  Construction of some new medical buildings could be stopped or delayed. 

And the loss of all those lost salaries and expenditures could slug the state’s economy with an almost $5 billion hit in 2018.

The study was commissioned by the Children’s Action Alliance, a children’s advocacy organization in Phoenix, in an attempt to produce good data that can be used to influence Congress.

While campaigning, President Donald Trump promised to immediately repeal the Affordable Care Act when he took office. But Republicans have yet to agree on whether to just repeal,  replace or just repair  the complicated law that has extended health insurance to about 20 million people in the U.S., and expanded coverage for millions more. It was enacted almost seven years ago.

Trump told Fox News last Sunday that the process to come up with a replacement could extend into next year. “I would like to say by the end of the year, at least the rudiments,” he said. He continues to call the act a “disaster.”

Criticism has been especially sharp in Arizona, where customers faced the steepest premium increases in the nation – 116 percent, according to estimates from Department of Health and Human Services – when this year’s open enrollment period began Nov. 1.

Without Obamacare, the study said Arizona will lose revenue from Medicaid expansion funds and insurance premium tax credits.

First, the health care sector will cut jobs and reduce salaries, the study said. Health care companies will limit purchases from suppliers and halt new construction. And when people don’t work, they don’t spend as much and contribute to the economy.

“Personal income in 2018 will be lower in Arizona by $3.5 billion,” McPheters said.

The study explored two scenarios with varying degrees of cuts to the health care program. In either case, health care job losses would account for 47 percent of all job losses in 2018.

The ASU study just looked at an outright repeal without a replacement and is a worst-case scenario. That would mean Arizona would lose Medicaid expansion funds and insurance premium tax credits, and probably state matching funds, too.

While the effects could be less if the law is replaced or repaired, the report underscores how the law helped Arizonans. More than 400,000 state residents gained health insurance, and the state’s uninsured rate fell by 36 percent, according to the U.S. Department of Health and Human Services. 

These extra patients boosted Arizona’s health care industry, providing more jobs at hospitals, medical offices, labs, and nursing and residential care facilities and other businesses.

While Arizona overall lost 300,000 in the Great Recession of the mid-2000s, health care jobs kept growing and now account for 15 percent of all jobs – more than any other employment sector. They grew 40 percent from 2005 through 2015 

McPheters said the health care industry continues to grow because it is largely subsidized by employers or taxpayers.  And aging baby boomers need more health care.

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Pima County in 2015 had 2,122 medical establishments and 2,807 employees. Health care made up 16 percent of all the jobs. That makes Pima County the second most dependent on health care jobs next to 24 percent in Apache County.

Health care jobs also make up 16 percent of metro Tucson jobs, the highest of all the state's metro areas. 

Even if the Affordable Care Act went away this year, health care jobs would continue to expand because of population growth.

But McPheters said the loss of the 29,400 jobs would “swamp” that growth and probably cause the overall number of health care jobs to fall  in 2018, throwing the industry into a temporary recession. After that, he predicted a modest recovery 

“We are not suggesting the economy completely goes into some kind of death spin,” McPheters said.

The effect on rural counties would be more pronounced because a larger part of their economies depend on health care jobs, said the ASU study.

Kimber Lanning, executive director of Local First Arizona, said the hospital is often the major employer and regional hub in rural Arizona towns.

“Those regional facilities can serve people in 100 miles in any direction,” she said.  “And if they have any of their services are reduced, it can have a direct impact on the well being of people in those communities. Poverty has increased significantly in the last 25 years in rural Arizona. Any threat to the economic sustainability of those communities is very dangerous.”

Cronkite News reporter Adriana Becerra contributed to this report.


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