If Tennessee's experience with its Medicaid expansion program is any guide, Obamacare will reduce employment, according to a new study by economists from Northwestern, Chicago, and Columbia universities.
That's the bad news. The good news is many of the people predicted to drop out of the labor force were working only to keep their employer-sponsored health insurance, meaning that they might benefit from public health insurance.
The paper, released by the National Bureau of Economic Research on Monday, is an examination of what the authors call a unique event in U.S. health care policy: In 2005, under Democratic Gov. Phil Bredesen, Tennessee abruptly ended its expansion of TennCare, the state's Medicaid program because of budgetary pressures (Medicaid is the low-income public insurance program jointly administered by the federal government and the states). About 170,000 adults lost insurance coverage through the program over a three-month period, according to the paper.
The study's authors were able to detect the effects of the mass disenrollment in jobs data: In 2005, there was a sudden employment increase in Tennessee that didn't occur in other Southern states.
Furthermore, right after the state dropped coverage for those in the TennCare expansion, Google searches for "job openings" spiked in Tennessee, but not in nearby states. Close to half of those who lost TennCare coverage quickly picked up insurance from an employer, according to the researchers.
The fact that so many people immediately searched for jobs following the loss of public health insurance suggests that many people work primarily not for a paycheck but for health insurance that would be unavailable or unaffordable if they weren't getting it through an employer. The researchers refer to this phenomenon as "employment lock."
That means that, for many individuals, getting public insurance could be a net gain even if it means losing work.
The study's authors — Craig Garthwaite of Northwestern, Matthew Notowidigdo of the University of Chicago, and Tal Gross of Columbia — note that they can apply the lessons from Tennessee to the implementation of the Affordable Care Act, because the relevant Medicaid population in Tennessee is similar to the one targeted in the planned Medicaid expansion under the health care overhaul.
They predict that 4.2 million low-income people who currently have employer-provided health insurance will take up Medicaid under Obamacare, far more than official projections indicated. The economists also project that between 530,000 and 940,000 individuals will leave employment once they are offered public insurance.