Call to Action: Healthcare Reconciliation
June 27, 2017 - As soon as this week, we expect a vote by the U.S. Senate on legislation to “repeal and replace” the Affordable Care Act (ACA). Now, more than ever, we as sector leaders need to stand up and make our voices heard about the potentially devastating impact that passage of this proposed legislation will have on our constituents and our state. We urge you to reach out to our Georgia Senators and your local elected officials immediately, employing both mission-focused and economic arguments to exert pressure while this bill is still being debated.
The ACA is primarily a health and financial security policy, not a jobs program. But, because the scale of the uninsured problem in the U.S. was so large pre-ACA, and because health care is so expensive and such a significant share of the overall U.S. economy—almost one-fifth (1)—the ACA’s repeal is a de facto macroeconomic policy. When implemented in 2014, Medicaid expansion and insurance and cost-sharing subsidies provided a significant and much-needed boost to state economies and job markets (2). Even though Georgia did not adopt Medicaid expansion, the ACA still had a large and sweeping effect on our economy—creating tens of thousands of jobs directly, indirectly, and through the induced economic boost of spending by newly-employed Georgians.
The practical effects of federal health care funding
The widespread economic consequences of changes in health care policy can be understood by looking at how funding flows from the federal government to states, consumers, and businesses. As illustrated in the chart below, federal tax credits first flow to health insurers, including state Medicaid programs. After covering their overhead, insurers spend most of that money on hospitals, clinics, pharmacies, and other care providers. These are the direct effects of federal funding.
Health care providers use most of their revenue in two ways: to hire and pay staff, and to purchase goods (like medical equipment) and services (like clinic space) from vendors. In turn, those vendors use that revenue to hire and pay their own employees, and buy additional goods and services. These are the indirect effects of federal funding.
The induced effect of federal funding manifests as individual workers use new income to pay for food, mortgages, rent, transportation, and more, providing income for other businesses.
Thus, the economic cycle initiated by federal funding ripples throughout the economy, both within and across state borders, generating additional local, state, and federal tax payments that feed back into the funding headwaters. When federal funds are cut, the results play out in the other direction, triggering losses in employment, economic activity, and state and local revenues (3).
Beyond the direct impact to nonprofit healthcare providers, and the indirect impact on vendors that serve them (including secondary nonprofits), the nonprofit sector would suffer an “echo effect” from the loss of federal healthcare funds as individual and corporate donors end up with fewer resources to contribute. At last, the state of Georgia will face sinking income tax revenue (due to employment disruption) and sales tax revenue (due to a slow-down in everyday purchases), giving it two choices: cut vital services or increase taxes.
What we’ve gained through the ACA
As a sector, our proclivity is to be the voice of our stakeholders—and there are plenty of reasons to forcefully protect those affected by our missions. However, nonprofits also have a major role to play in advocating for the economy—after all, we account for 9 percent of Georgia’s private employment (and that’s just one metric), meaning we are one of the “job creators” so often referenced by our elected officials. This role represents another powerful, and needed, point of influence in our relationship with state officials currently weighing their support of the ACA repeal-and-replace legislation.
Another point of influence is our role as economic drivers in healthcare and the myriad of safety-net supports relied upon by local communities and governments: Spending on health care and social assistance accounted for one-quarter of Georgia’s increase in GDP between 2012 and 2013, and nonprofits dominate those state industries.
The bottom line for our economy? In direct impacts alone, the ACA repeal-and-replace bill would reduce Georgia employment by about 6 percent, a net job loss of 25,090 (2). Proportionally, the nonprofit sector would be especially hard-hit, as the healthcare, mental health, substance abuse and disability segments represent the most nonprofit jobs and the largest portion of nonprofit revenue. Another easy-to-overlook consequence is the interstate effect of slowed construction and fewer purchases from neighboring states, with widespread repercussions for multiple sectors. And while it is hard to estimate the impact on philanthropic giving, the general effect of economic shocks is negative.
The bottom line for our citizens? Half of U.S. hospitals are nonprofits, as are some of the nation’s largest insurers and federally-funded community health centers. In general, about a quarter of all nonprofits receive some form of Medicaid payment, and fully half of nonprofits specializing in outpatient mental health and substance abuse services for low-income populations receive Medicaid revenue (4). A sudden funding reversal would be highly disruptive to the sector’s capacity for serving patient populations, whose needs would skyrocket as millions of Americans lose benefits and turn to community services providing emergency assistance.
Your advocacy is needed now.
Already, communities across Georgia are reeling from the closure of community hospitals—and those services, jobs, and economic benefits are not coming back. Nonprofits in Georgia stand to lose significantly with the ACA repeal-and-replace proposal. Our clients and community stakeholders stand to lose even more—personally, economically, and in infrastructure—if health and safety-net services are set back even further, likely forcing additional closings in areas that can ill afford them.
We urge you to reach out to our Georgia Senators and your local elected officials immediately, employing both mission-focused and economic arguments to exert pressure while this bill is still being debated.
How to contact elected leaders:
Further reading & reference:
“What’s in the Senate healthcare bill,” The Hill
“Repealing the Affordable Care Act would cost jobs in every state,” Economic Policy Institute
(1) Sean P. Keehan, John A. Poisal, Gigi A. Cuckler et al., “National Health Expenditure Projections, 2015–25: Economy, Prices, and Aging Expected to Shape Spending and Enrollment,” Health Affairs, Aug. 2016.
(2) Leighton Ku, Erika Steinmetz, Erin Brantley, and Brian Bruen, “The Economic and Employment Consequence of Repealing Federal Health Reform: A 50 State Analysis,” Milken Institute School of Public Health, Department of Health Policy and Management, George Washington University, 2017.
(3) Leighton Ku, Erika Steinmetz, Erin Brantley, and Brian Bruen, “Repealing Federal Health Reform: Economic and Employment Consequences for States,” The Commonwealth Fund, January 5 2017.
(4) Scott W. Allard and Steven Rathgeb Smith, “Unforeseen Consequences: Medicaid and the Funding of Nonprofit Service Organizations,” Journal of Politics, Policy and Law, Dec. 2014.