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WATCH: Henry Aaron Says We Will Be Better Off for Affordable Care Act

Senior Fellow Henry Aaron appeared on C-SPAN’s Washington Journal program this morning in a discussion about the economic impact of the Affordable Care Act (aka, Obamacare). He was joined by economist Casey Mulligan, a professor at the University of Chicago.

You can access and watch the entire program here. Some highlights of Aaron’s appearance on the program appear after the video.

Does ACA Cause a Productivity Loss?

Aaron, the Bruce and Virginia MacLaury Chair, replied to Prof. Mulligan’s charge that the Affordable Care Act causes productivity losses throughout the economy, saying that:

(3:25) One can look at the price side of what the law is doing or one can look at the benefits side. The objective of this law is to enable people who previously did not have access to health insurance, and hence suffered needless illnesses, to have better access and that will improve their productivity. Over time, employers—and this is pretty well established among economists—end up deciding how much they want to pay workers overall. If they are paying a little more in the way for health insurance for some workers who were previously uninsured, there will be a little less wage but there is no evidence that the overall impact on the demand for labor by employers should be materially affected.

But there is a more fundamental point, really. This argument—the tradeoff between efficiency and compassion—has been going on for 200 years. Ever since the English poor house, when critics complained that if homeless mothers were given shelter and food and their children were similarly supported would somehow induce bad behavior on the part of the lower classes. We have as a compassionate society here, and in all other developed countries, struck a balance between providing support for those who need it and the kinds of incentives to which Professor Mulligan drew attention. There is a tradeoff and I think the tradeoff that this law strikes—making sure that people have adequate insurance, giving them the option if they choose not to buy it not to buy it and pay a tax instead, that’s their call, people are free to do that—but it improves the options that are available for people to be able to achieve a fair balance between their needs and the incentives that society provides for economic efficiency.

Did Federal Government Employees Get a Special Deal?

One caller claimed that the federal government “tried to get out of [Obamacare]” and then “finagled subsidies for themselves,” meaning federal employees. Aaron, who sits on the Executive Board of the D.C. Health Exchange, said:

(10:00) “Basically what the federal government employees are doing is getting an employment-based insurance plan through the DC Health Exchange. As with other companies in which the employer pays a portion of their premium, that is also applying here in the case of federal employees. So there is no special deal and there is no separate subsidy for employees. They are simply buying coverage through the DC health Exchange.

Will Undocumented Immigrants Get Free Health Care?

(25:40) When one caller from South Carolina worried that the Obama administration’s potentially allowing millions of undocumented immigrants to remain in the country would allow them access to free healthcare on the taxpayers’ dime, Aaron explained that the undocumented  now get free health care when they visit hospitals, and that the immigration measures reported to be under consideration by the administration would “enable those people to take regular employment and earn more than they are now able to do [and] would actually help deal with the problem which so troubles you.”

The Affordable Care Act Was an Incremental Change

Aaron addressed the continuing controversy about the law by putting it into the context of reform:

(31:18) “We evolve, we change gradually. And that is why for all its flaws and complexities, the Affordable Care Act actually built on the system that we had, it’s an incremental change; it didn’t sweep out the whole health care system and replace it with a National Health Service as in Great Britain. It didn’t sweep away employment-based coverage and give everybody a voucher as Senator McCain suggested during his presidential campaign. It built on our system which happens to be the most complicated in the world. And surprise! The reform is complicated. It annoys a lot of people; it annoys me. And I think there are things that can be done better.

But if we weren’t going to have a revolution in our health care system we had to build on what was there before, a very complicated system. … I didn’t see any sense that the nation was disposed for revolutionary change either toward vouchers or toward a national tax finance system. It barely tolerated, politically, the reform we had. We are going to try to make it work. I think it will work eventually. It will take time, and money, and patience. And in the end I think we will be better off for it.”

The conversation also covered insurance industry regulation, pharmaceutical costs, and other related issues.

Get more research and commentary from Brookings experts on the Affordable Care Act.

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