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DU study shows health care reform is good for Colorado’s economy

It’s been described by President Barack Obama as a way to meet a “core ethical and moral obligation” and couched as a matter of social justice among advocacy groups who believe access to quality health care is a basic human right.

But morals and ethics aside, is health care reform good for the economy?

Unequivocally yes, say the authors of a new report by DU’s Center for Colorado’s Economic Future.

“We were able to demonstrate that even when you account for the fact that you have to pay for reform [via higher taxes], there is still a positive net benefit on the state economy,” says Phyllis Resnick, principal economist for the center and co-author of the report. “We will end up with a bigger economy and a healthier job situation with reform than without it.”

The 76-page analysis, produced in collaboration with the nonprofit New America Foundation, showed that for every dollar invested in new health care spending in Colorado, an additional $2.44 would be generated locally. That means that if Colorado taxpayers spent $1 billion in the first year of health care reform, a net $2.44 billion in new economic output would result. By 2019, state economic output would be nearly 1 percent higher than it would be without reform, and roughly 19,000 new jobs would be created as a result of the reform, according to the report.

“It turns out that health care spending creates a lot more economic activity than many other forms of spending you can choose,” Resnick explains. “If you go see a doctor, that doctor is likely to turn around and spend what you pay him locally, whereas if you buy a big-screen TV at the local Best Buy, that TV was probably made overseas and much of the money ends up there. With health care spending, there is a lot less leakage out of the local economy.”

The report was commissioned by the Colorado Trust and the Colorado Health Foundation in fall 2008, just when debate over health care reform was beginning to crescendo on both the state and federal level. The Colorado Blue Ribbon Commission for Health Care Reform — aka the 208 Commission — had just completed its proposal to the state on how best to create a sustainable future for its health care system. Meanwhile, proposed federal legislation was under consideration on Capitol Hill.

While many proponents were stressing the impact health care reform would have on the lives of the uninsured or the underinsured, far fewer were talking about the macro-impact on the state’s fiscal bottom line, says Christie McElhinney, vice president of public affairs for the Colorado Trust.

“We felt like there was not enough data available that talked specifically about the fiscal impacts health reform would have on Colorado,” she says.

The report was designed to fill that gap, but because it was begun well before the historic — and somewhat unexpected — March 2010 passage of the Patient Protection and Affordable Care Act, the researchers instead based their projections on the 208 Commission’s proposal for the state. In the end, the two plans look very similar, with both establishing a new, regulated insurance marketplace to make health coverage more accessible, requiring all individuals to purchase coverage, expanding Medicaid eligibility, providing financial assistance to make coverage more affordable, and including strategies to make health care delivery more efficient.

The biggest difference between the two plans is that, under the new federal law, the federal government will pay a larger share of the cost, and Colorado taxpayers will shoulder less of the burden than what was presumed under the 208 Commission’s proposal.

“The reality under federal reform is that there will actually be an even larger economic impact on Colorado than we demonstrated,” Resnick says.

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