Stanford researchers say Obamacare could save taxpayers billions each year

July 5, 2014, 12:39 a.m.

In a study published by the National Bureau of Economic Research in June, a group of Stanford academics discovered that transferring government workers and all retirees under 65 to Obamacare would save U.S. taxpayers $12 billion per year.

Researchers explained that by switching consumers to Obamacare, the number of people whose health insurance is funded at the federal level would rise. This increase would result in less variation in the cost of insurance, and individual taxpayers would therefore need to pay less in federal taxes.

Co-author of the study and Stanford associate professor of medicine Jay Bhattacharya ’90 M.D. ’97 Ph.D. ’00 explained that the switch would also help alleviate budget pressures placed on state and local governments (SLGs).

Today’s SLGs have large liabilities due to the health benefits they are required to provide government workers. If the workers shifted to Obamacare, SLGs would save billions from the benefits that would be funded at the federal level, rather than the local and state levels, said Bhattacharya.

The study also found that switching to Obamacare would be advantageous to both healthcare recipients and employers.

Because many retirees are low-income, they would qualify for large federal subsidies if they were to transition from employment-based health insurance to Obamacare. In addition, tax cuts as a result of affordability credits and healthcare exchanges would prevent the switch from causing an overall increase in taxes for taxpayers. The tax cuts would counterbalance the cost of the federal subsidies.

Researchers explained that employers would also benefit financially from the switch since they would no longer have to support their employees’ various former insurance providers. Shifting current government workers to federally-subsidized health insurance would be advantageous for the same reasons.

According to the study, by just moving all of its retirees under 65 to Obamacare, California would save $170 million per year. Given the budget crises and economic troubles California faces, from a fiscal point of view it makes sense to move these workers, the researchers explained.

But making the switch would also have its consequences. Increased subsidies could further burden the federal government, even if the SLGs would benefit, and Bhattacharya explained that the issue is more than economic.

“Frankly, I haven’t decided where I come down,” Bhattacharya said. “Moving over to the Exchange would be very disruptive. The Affordable Care Act has fewer networks: fewer doctors and hospitals that would be covered by the insurance. That tends to make a lot of people unhappy – they would rather have free choice.”

“On the other hand, it’s a lot of money at stake, especially given the state of California’s economic situation,” he added.

Although Obamacare can provide high-quality care at lower costs, many people remain decidedly skeptical. Bhattacharya predicts that some workers will object on a visceral level to what they view as narrowed choices and limited plans.

Frances Cox, a San Francisco attorney who recently underwent surgery at Stanford, believes that the matter puts individuals’ liberty at stake and that the role of the government is being unduly expanded.

“When I have a health issue, I want to be able to choose the best doctor available,” Cox said. “I don’t want to be deprived of that freedom. If it’s a life-threatening issue, it can literally be a matter of life and death. I am not at all confident that the quality of the [Obamacare] health insurance is comparable [to my private insurance].”

“I trust my physician,” Cox added. “If I have a health problem, I go to him. My health is between my doctor and me, not my government and me.”

Though Obamacare continues to face criticism and resistance, the study raised important questions about the economic implications of socialized medicine, and the researchers hope that their study may encourage state and local governments to rethink their views of U.S. health insurance.


Contact Caroline Harris at 15charris ‘at’ castilleja ‘dot’ org.

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