California could gain up to 100,000 jobs and $4.4 billion in economic spillover if the Supreme Court upholds the Obama health care plan next month, according to a new report.
The Bay Area Council Economic Institute estimates that Southern California has the most to gain. The reform could add up to 65,000 jobs and more than $3 billion to the region's economy, three-quarters of the state's total.
Had the health care law taken full effect in 2010, the report says that California's economy - helped by federal and state subsidies - would have received a $6.7 billion boost from new spending on doctors, hospitals, medical device manufacturers and the hiring of additional employees "who will then spend more money on food, clothing, and shelter, among other things."
The boost far outweighs the economic cost of requiring more employers to pay for their workers' insurance, according to the report.
In addition, the report concludes that many consumers - particularly in the more affluent parts of the state - would have more disposable income as the result of lower insurance premiums.
A healthier population would also take a more active part in the labor market and miss fewer days for sickness.
The findings add fodder to those who argue that the law will have a positive effect on the economy.
Most of the debate over the Affordable Health Care Act has focused on its mandate that everyone buy insurance and its ban on insurance companies denying coverage to those with pre-existing conditions. The mandate is being challenged in the Supreme Court and a decision is expected by the end of June.
The report seeks to break down the law's overall economic impact on California and suggests that it would serve as a large stimulus. The study was conducted by the Bay Area Council, a business-sponsored, public policy advocacy organization based in San Francisco.
"It is important to emphasize that the Affordable Care Act was not designed to be an economic stimulus bill ... and the fact that the law also will have a significant positive economic impact is a strong corollary benefit to a policy change designed to achieve other ends," the report says.
The law aims to expand coverage to 30 million Americans, including 7 million in California, who are currently uninsured. In Southern California counties, more than one in four residents lack insurance.
By analyzing how money saved on premiums and how subsidies for insurance will be recycled, the report concludes that the multiplying effect will boost the economy.
The conclusions are hardly surprising to many economists who have studied the financial consequences of this law, according to the report's author, Micah Weinberg.
Weinberg said the analysis is a conservative one, and that the assertion that the bill will harm the economy "has no real ground in reality."
Republicans in Washington say the health law will add more than $100 billion to the debt and some conservative economists cast doubt on the report's optimistic assumptions.
"We have heard countless times that recycling our tax dollars through Washington, D.C. magically multiplies economic growth. But it never works out that way," said John R. Graham, Director of Health Care Studies at the Pacific Research Institute in San Francisco, which filed a brief before the Supreme Court challenging the law's constitutionality.
"Instead, the state and federal governments collaborate to prey upon taxpayers while both levels of government go into debt," he said.
There is also a negative side for the economy as a consequence of large businesses complying with the "employer mandate," requiring them to provide health care coverage to their employees or pay a fine, which could cost the state's economy $2.4 billion.
Yet this is overcome by medical and consumer spending, which inject money in the economy, according to the Bay Area Council report.
The job gains won't significantly change California's unemployment rate, which is currently just below 11 percent. But the law is expected to add 87,800 jobs - a 0.6 percent increase in total employment - the vast majority being a result of medical care spending.
Not surprisingly, the sector of the economy that will benefit the most is the health care and social assistance industry, with roughly 46,700 new jobs.
The infusion of new jobs and subsidies would lead to a $4.4 billion economic gain for the state, which represents 0.23 percent of its $1.9 trillion gross state product.
There are significant differences by region within California.
Employment could rise as much as 1.3 percent in the Sacramento Valley, while the estimate for the Bay Area is just 0.2 percent. Southern California would be the largest beneficiary in terms of numbers with a gain of roughly 58,000 jobs.
The Bay Area is likely to see its economy contract by $409 million, while Southern California would expand by $3 billion.
The health care law's positive repercussions would not be confined to California. Weinberg has conducted a comparable analysis in Colorado and found similar results.
"There is no reason to believe that the direction and scale of the predicted impacts would be unique to the state," Weinberg said.
The California News Service is a journalism project of the University of California Washington Center and the UC Berkeley School of Journalism. Email the California News Service atcns@ucdc.edu.
