Opponents of the Affordable Care Act have used the most recent Congressional Budget Office (CBO) report(1) on the nation's economy to claim that the health care law "kills jobs" and forces people out of the labor market.
Those claims, along with botched headlines and erroneous reporting, ignored important details in the report. Confusion about the report was evident in the halls of Congress.
During testimony about the report, Rep. Paul Ryan, chairman of the House Budget Committee, stated: "Obamacare is clearly part of the problem. It adds trillions of dollars in government spending, and it has made things worse for our economy and for working families. By 2017, CBO projects that people will be working fewer hours precisely because of the incentives created in this law" ... "and these changes, they disproportionately affect low-wage workers. Translation: Washington is making the poverty trap much worse."(2)
The CBO report is clear that employers will not eliminate jobs. Rather, it says that Americans might choose to work less. Does the report suggest that the ACA will create more hardship for working families and harm the economy? In a word, no.
The CBO says that, as a result of the ACA, lower-wage Americans have a greater opportunity to work fewer hours or not seek additional employment in order to afford health insurance. Additionally, some older Americans might transition from full-time to part-time work, or they might choose to retire since they would no longer have to rely on employer-sponsored insurance.
These conclusions are not new. In its initial scoring of the ACA, the CBO projected that individuals would voluntarily leave the labor market or would reduce working hours because of more affordable insurance coverage.
The CBO's latest report sees that effect as part of a larger trend. It says that participation in the labor force has been declining and is expected to continue to decline. Between 2007 and the fourth quarter of 2013, the participation rate dropped by about 3 percent. About half of that decline was the result of baby boomers moving into retirement or reducing work hours.(3) This trend will continue and will be the largest factor, by far, in reducing the number of workers in the labor force over the next 10 years. Additionally, the economic downturn and limited job opportunities caused many frustrated job-seekers to leave the job market. This accounts for one-third of that 3 percent decline.(4) By the end of 2017, labor participation is projected to drop by another 0.4 percent.(5)
Between 2017 and 2024, the CBO estimates, the number of work hours in the total economy will be 1.5 to 2 percent lower than what would have occurred in the absence of the ACA. That translates to 2 million to 2.5 million full-time-equivalent employees over that seven-year period.(6) Most of this drop will be in low-wage sectors of the economy. Since premium and cost-sharing subsides under the ACA decrease as individual income increases, this can create a disincentive for low-income workers to expand working hours or work another job.
But is that all bad? Is it better for low-income Americans to work longer hours (in many cases more than the traditional 40 hour work week), hold down more than one job or continue working into older age simply to have access to affordable health insurance? Is it better to have the option of working fewer hours to take care of children or an elderly parent? Workers would still have the option to increase their take-home pay, give up some subsidies and pay a greater share of the cost of their health insurance.
According to Doug Elmendorf, director of the CBO, "These subsidies, of course, make these lower-income people better off. ... By providing these people a subsidy, these people are better off, but they do have less of an incentive to work."(7)
There were other key points in the report that did not find their way into headlines and news stories. Part-time employment has not increased as a result of the Affordable Care Act. This is directly contrary to predictions of the law's opponents, who claimed that the employer-responsibility provisions in the ACA would lead employers to convert full-time jobs into part-time ones.(8)
Also, the CBO reduced its estimate of the net cost of the ACA by $9 billion through 2024, in part because of the number of states that have refused to implement the law's Medicaid expansions. And the CBO still maintains that, over the 10-year window of its analysis, the ACA will reduce the federal deficit. In fact, that trend is expected to increase in subsequent years, with the ACA leading to greater deficit reduction.
On premiums, the CBO found that rates in the insurance exchanges are projected to be 15 percent lower in 2014 than earlier projections.
The CBO and the Joint Committee on Taxation estimate that the number of non-elderly people who have health insurance will increase markedly – by about 13 million in 2014, 20 million in 2015, and 25 million in each of the subsequent years through 2024.(9) They also suggest that enrollment in the individual insurance market will reach about 6 million people in 2014, about 1 million people fewer than originally estimated. However, the CBO says enrollment may jump as the April 1 deadline for open enrollment nears, which may put the figure closer to 7 million.(10)
Finally, according to the CBO report, "On balance, the CBO estimates that the ACA will boost overall demand for goods and services over the next few years" and "the net increase in demand for goods and services will in turn boost the demand for labor over the next few years."(11) In everyday language, that means the ACA will boost the economy and, in turn, create jobs.
Ultimately, legislation and laws are about more than labor-participation numbers and budget projections. They are also about the quality of life in America. Medicare and Social Security became law to provide older Americans security and dignity in old age. Medicaid became law to ensure that very low-income parents, children and people with disabilities have access to care that they otherwise could not afford. As a society we undertook the burden of supporting these programs because of the degree to which they improved the lives of our fellow citizens. It is all too easy to forget this in our current political environment.
– Bob Semro
1) Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024.
2) U.S. Economic Outlook, C-SPAN, Feb. 5, 2014.
3-5) Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024, page 38.
6-8) U.S. Economic Outlook, C-SPAN, Feb. 5, 2014.
9) Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024, page 107.
10) Michael Hiltzik, Why the new CBO report on Obamacare is good news, Los Angeles Times, Feb. 4, 2014.
11) Congressional Budget Office, The Budget and Economic Outlook: 2014 to 2024, page 125.