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A Project of The Annenberg Public Policy Center

Romney’s Health Care Law Killed Jobs?

The Perry campaign has been pushing a questionable claim that the Massachusetts health care law, signed by then-Gov. Mitt Romney in 2006, “killed 18,000 jobs.” But that number was churned out by an economic model used by a conservative think tank, and it’s unknown whether the figure is accurate.

At last week’s Conservative Political Action Conference in Orlando, Texas Gov. Rick Perry said: “If Romneycare cost Massachusetts 18,000 jobs, just think what it would do to this country.” Campaign spokesman Ray Sullivan also has referred to the study in criticizing Romney, saying the law “killed 18,000 jobs,” including in statements made prior to last week’s debate in Florida. What’s the truth behind this talking-point-in-the-making? We interviewed several experts to find out.

That 18,000 number isn’t a hard count of laid-off or fired workers, as Perry’s claim may lead some voters to believe. Instead, it’s an estimate from a conservative think tank – The Beacon Hill Institute at Suffolk University — that ran health care cost variables through its economic model and determined that the state had “created 18,313 fewer jobs in 2010 than it would have had [the state health care law] not been in place.”

We can’t say whether or not Massachusetts businesses really chose to create 18,000 fewer jobs – or any other number – because of the law, but here’s what we can say:

  • Paul Bachman, one of the authors of the study and director of research at the Beacon Hill Institute, told us that 18,000 “is quite small.” How small? It’s less than 1 percent — 0.56 percent, to be exact — of the total number of jobs in the state.
  • Other experts disagree with the basic premise of the study – that the law led to higher costs, particularly for employer-based premiums. MIT economist Jonathan Gruber, who advised both the Romney administration and the Obama administration on health care, told us he doesn’t see evidence that the law caused premiums to rise. They did go up, but it’s not clear that the law was the cause. In fact, the percentage increase was higher in other nearby states that didn’t pass a health care overhaul (see pages 11-12 of this Gruber report).
  • Opinions of employer groups are mixed. Richard Lord, president and CEO of Associated Industries of Massachusetts, the state’s largest employer group, said in an interview with FactCheck.org that AIM’s members “tell us they’re concerned about high health care costs, but it’s really due to health care inflation and not due to the law.” On the other hand, Bill Vernon, state director of the National Federation of Independent Business, said that small businesses that are just under the coverage requirements of the law — that’s employers with fewer than 11 employees — are reluctant to hire an additional person. They then would have to offer coverage or pay a $295 per-employee, per-year fine.
  • Massachusetts’ unemployment rate mirrored the nation’s back in April 2006, when the law was enacted — 4.8 percent for the state compared with 4.7 percent for the nation. But the state has fared better than the U.S. overall since. Its rate is now 7.4 percent, compared with 9.1 percent for the country. Of course, the Beacon Hill study claims the state would be doing even better.

We’ll try to give you the methodology of the study in a nutshell: The Beacon Hill Institute developed a trend line for employer-sponsored premium costs in the state (as well as trends for Medicaid spending) for about a decade before the law was passed in 2006, and then projected that trend for future years, Bachman explained. It then attributed to the law the increase in premiums after 2006 above that trend line. Costs attributed to the law were then plugged into a complicated economic model, which determined that the state would have about 18,000 more jobs today if the law hadn’t been passed.

Causal relationships are difficult to prove. Can the institute really say that any cost above a projected trend line is due to the health care law? Bachman says that economic theory “supports the thesis.” Demand for health care has gone up in the state, since more residents are insured, he says, “without a corresponding expansion of supply. … And in that scenario you would get price increases.”

When we told Bachman that the state’s largest business group wasn’t complaining about the law costing jobs, he said that these lost jobs are probably at small businesses, not larger employers. And more research would need to be done to reconcile AIM’s observation with the Beacon Hill economic model: “If you really wanted to reconcile them, you would do a survey” of businesses, particularly small businesses, he said. “You would probably get a better picture.”

Vernon, at NFIB, does believe that “insurance costs have cost jobs in Massachusetts,” but he also noted that insurance costs have long been a major concern for small businesses. Plus, changes have been made in the implementation of the law that weren’t Romney’s doing, he said. Jon B. Hurst, president of the Retailers Association of Massachusetts, told us that the short answer is: “Who knows?” Health insurance costs have disproportionately affected small businesses, and they’ve seen “the brunt of the increases since the law passed.” Those rising costs and the lack of new business have “held back hiring,” he said. But, he added, he can’t verify actual job losses.

Overall, health care costs aren’t driving employment numbers, Vernon said. “Most economists would tell you we don’t have job growth because we don’t have sales; we don’t have business to support the jobs,” he said. “If I need somebody to do the business, then I’m going to hire somebody,” regardless of whether health care costs are high or low.

The Massachusetts law has led to higher spending by employers – employer-based insurance went up after it was passed, at least partly because workers who had previously refused a company offer of coverage, started taking it. The Massachusetts Taxpayers Foundation estimated that the additional cost to businesses was $750 million a year. But that’s 5 percent of total employer health spending, said Michael J. Widmer, the group’s president, who puts the total spending at about $15 billion in 2010. He told us employers largely absorbed that $750 million cost, and Lord agreed. “Most employers I talked to said, ‘Hey we offered this benefit to everybody, and if more people take it up … we’ll manage,’ ” Lord said. “We didn’t get much negative feedback about that.”

Widmer also doesn’t buy the Beacon Hill study. “There is no evidence to conclude that Massachusetts health reform has cost jobs,” he said.

— Lori Robertson