Widgets Magazine

Stanford researchers say Obamacare could save taxpayers billions each year

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.

  • UrbanCamper

    Ivory Tower liberal speculation. Who cares for it these days?

  • Jake Stein

    Note the word “could”. I have doubt in most of this so called “studies”. There was talk before Obamacare about how it would save everyone money and not affect the insurance of those that had it. Look at what happened: CANCELLED insurance and doubled rates for new plans.

  • Gary Purdum

    So, these f-ing geniuses have determined that shifting cost from state and local govs to the fed will “save” taxpayers money. When has shifting anything to the federal government resulted in less cost? These fuzzy headed academics should worry about retaining their tenure and quit trying to “fix” anything harder than a latte. There seems to be a distorted logic in academia which has concluded that money spent by the federal gov is free. Of course, we are going to be paying for Obama’s “free” crap for many years to come.

  • Mark

    umm… people who believe in science… and facts. You know, those people.

  • Regenz

    I am in favor of all government employees including the executive being forced into 0bamacare. That way, they can see the damage they have wrought.

  • disqus57

    This is an interpretation by an intern of a study by Stanford academics on their projection of the impact of a speculative health care policy shift on future governmental economics. If you’re citing this as “science… and facts,” then you may be the one who is confused.

  • cardcounter

    I don’t follow the logic. Health care costs continue to rise. You can play musical chairs with who pays for it, but that won’t reduce the cost of medical care. Either people directly or through government will pay for health care. The total cost will not change.

    From past experience any major program through the federal government is saddled with misuse, abuse, and corruption. There will be all kinds of government bureaucrats planning lavish conferences at expensive hotels that will be a waste of money.

  • Sanjoy

    No, I don’t think that he/she equated this study with “science and facts”. The most vociferous opponents of the ACA are usually the same ones who deny anthropogenic climate-change and the theory of evolution. Scientific facts such as these are dismissed as products of ‘liberal minded’ academics. That was (or should have been) the point being made.

  • Sanjoy

    When has shifting anything to the federal government resulted in less cost?

    The economics of scale.

  • KeepItReal

    Funny how people complain about the ACA without really understanding it. The Exchanges are simply markets for private health insurers to compete and people making over $200K a year provide funding (along with certain industries) for those lower on the economic ladder. That’s it – end of story.

    Those who make less than 134% of poverty wages can enroll in Medicaid (in the States that approved it). Between those two functions and certain aspects of Employer based insurance in the law and allowing 26 years and younger on their parent’s policies, the ACA is covering between 24-29 million people RIGHT NOW (see acasignups.net ). It will likely jump to 35-40 million in the next couple of years.

    The ACA isn’t for everyone. There are other choices through employers and the individual market (non-Exchange based). There is certainly choice and now many more can get insurance. Why isn’t this a priority in this country? Always baffles me…

  • Candid One

    Meh. You bring your own agenda and try to spin with flagrant disregard for article’s content. Science is about theory. Engineering is about facts.

    This research stipulates tradeoffs. Because of such gotchas, it doesn’t provide more than speculative conclusions. The quoted co-author is quite ready to concede that acceptability of the implications is problematic. There’s nothing mentioned in this article that inherently has a political slant. This is about economics, about possible savings, and about the individual preferences that could overridden in particular respects. This is an elaboration of parameters for possible scenarios. Facts? The fact is that only issues are being described, not prescribed.

  • Candid One

    “Scientific facts” is a non sequitur. Your own wording betrays that you’ve been victimized by the propagandists and the media fuzzies who cultivate erroneous soundbites. Theory is not fact…you know that. You play into the confusion by accepting that mistaken conflation.

  • Candid One

    The rise of health care costs has been slowed. The CBO announced that appraisal last summer…before its implementation. The acceleration of the rise of health care costs has been reduced–which is why the GOP has turned its attention to other issues. The PPACA–despite the refusal of the House GOP to support the *anticipated* adjustments–is working. So much positive anecdotal testimony has derived from their own constituencies that the GOP has moved on to different obstructions.

    Your allegation about “past experience” recalls the ironic images of the Tea Party demonstrations prior to the passage of PPACA…photos and videos of demonstrators with signs declaring against “socialized medicine” and “keep your hands off my Medicare!” The Tea Party wallows in Medicare, the closest medical care program to socialized medicine in US history…the closest to a Single Payer program in US history. Abuse and corruption? By whom? Our friends, neighbors, and relatives…if they think that they can get away with it. Our government gets its foibles from its constituents, the public.

  • Candid One

    The main reasons for the relegation of anti-Obamacare to the commentaries, instead of GOP podiums, are the slowing of the rise in health care costs–announced by the CBO last summer before its scheduled implemention–and the reality of its success. The numbers of discontinued and cancelled policies isn’t a new phenomena; that’s been happening for decades. We hear more about them now because of their political value. Those uninsured who were expecting to benefit from PPACA–because they’d already been dumped, or had been refused coverage because of pre-existing conditions–were prominent mention in recent years of campaigning for Obamacare. “Doubled” rates is a misleading oversimplification. Many insured had bought low premium, high deductible, low-maximum policies that weren’t going to meet the PPACA standards. In too many cases, those insurance clients weren’t being covered well. Many HCI analysts saw this coming. Many HCI analysts described such plans as ripoffs that wouldn’t protect against a catastrophic illness or injury.

  • james

    What is the probability government union employees would give up their gold plated health insurance for Obamacare?

    Answer: zero.