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CBO: Health-care law will mean 2 million fewer workers Health-care law will prompt over 2 million to quit jobs or cut hours, a CBO report says
(about 4 hours later)
The Affordable Care Act will reduce the number of full-time workers by more than 2 million in coming years, congressional budget analysts said Tuesday, a finding that sent the White House scrambling to defend a law that has bedeviled President Obama for years. More than 2 million Americans who would otherwise rely on a job for health insurance will quit working, reduce their hours or stop looking for employment because of new health benefits available under the Affordable Care Act, congressional budget analysts said Tuesday.
After obtaining coverage through the health law, some workers may forgo employment, while others may reduce hours, according to a report by the Congressional Budget Office. Low-wage workers are the most likely to drop out of the workforce as a result of the law, it said. The CBO said the law’s impact on jobs mostly would be felt after 2016. The findings from the nonpartisan Congressional Budget Office revived a fierce debate about the impact President Obama’s signature health-care program will have on the U.S. economy.
Republicans quickly pointed to the report’s findings as more evidence of the health-care law’s flaws, one of their major themes ahead of this year’s midterm elections. Republicans see the Affordable Care Act as a political boon this year, after the disastrous launch of the law’s Web site last fall. The White House scrambled to defend the law, which has bedeviled Obama since its 2010 passage, arguing that the report shows it will work as planned, freeing people to care for their children, retire early or start their own businesses without worrying about health coverage.
The CBO report said those rocky beginnings of the federal online marketplace would suppress enrollment this year, though not in the future. The agency predicted that the number of Americans who buy private health plans through the new insurance exchanges before a March 31 deadline for coverage in 2014 will be 6 million, while the number of low-income people who join Medicaid this year will be 8 million. “The Affordable Care Act today, right now, is helping labor markets, is helping businesses and is helping jobs,” said Jason Furman, the president’s chief economist.
Both figures are 1 million fewer people than the CBO had forecast the last time it issued such a prediction, nine months ago. But Republicans hailed the report as fresh evidence that the law will decimate the American workforce, encouraging people to forgo private employment in favor of taxpayer handouts.
The White House rushed to respond, insisting that the law will be positive for the economy and that any reduction in total workers will be far offset by the law’s benefits. It also stressed, as the CBO did, that the 2 million fewer workers reflect the equivalent of people dropping out of the labor force and cutting back on hours. “Today’s CBO report gives a sobering outlook on our economy,” Sen. Bob Corker (R-Tenn.) said in a statement. “It confirms what we’ve known all along: The health care law is having a tremendously negative impact on economic growth.”
The CBO previously estimated that the economy would have 800,000 fewer jobs in 2021 as a result of the law. In that analysis, the CBO looked primarily at how employers would respond to a new penalty for failing to offer insurance to employees who work more than 30 hours a week. That response would include cutting people’s hours, hiring fewer workers and lowering wages for new jobs. The report raises new questions about the health-care law just as some Republicans are again looking for concessions related to the Affordable Care Act in exchange for an agreement to raise the federal debt limit. Treasury Secretary Jack Lew has urged quick action on the debt limit — with no concessions or negotiations — saying he could run out of cash to pay the nation’s bill’s by the end of this month.
On Tuesday, the agency released a more-detailed estimate that includes how ordinary Americans would react to those changes by employers. Some would choose to keep Medicaid rather than take a job at reduced wages. Others who typically do not work full-time would delay returning to work in order to keep subsidies for private insurance that are provided under the law. Meanwhile, the health-care law promises to be a major issue in midterm congressional elections this fall, with Republicans looking to bludgeon Democrats over the program’s botched launch and Democrats hoping to highlight the millions of Americans who have gained coverage.
As a result, by 2021, the number of full-time positions would be reduced by 2.3 million, the report said. On Tuesday, few Democrats publicly defended the law, a sign that lawmakers recognize its vulnerability. In its report, the CBO said severe technical problems during the October rollout of the HealthCare.gov Web site would sharply curtail enrollment this year.
The reduction in employment from the health-care law “includes some people choosing not to work at all and other people choosing to work fewer hours than they would have in the absence of the law,” the CBO said. In its assessment of the law’s impact on the jobs market, the agency had bad news for both political parties. In an implicit rebuke of GOP talking points, the CBO said that there was little evidence that the health-care law is affecting employment and that businesses are not expected to significantly reduce head count or hours as a result of the law.
White House press secretary Jay Carney immediately pushed back against the estimate, saying in a statement, “Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report.” But the report also contained a setback for the White House. The CBO predicts that the economy will have the equivalent of 2.3 million fewer full-time workers by 2021 as a result of the law — nearly three times previous estimates.
White House officials added that the CBO report also rebuts a key claim of Republicans — that the law has already had a significant impact on employment, including increasing the number of part-time workers. After obtaining coverage under the health-care law, some workers will choose to forgo employment, the report said, while others will voluntarily reduce their hours. That is because insurance subsidies under the law become less generous as income rises, so workers will have less incentive to work more or at all.
Carney said: “CBO’s findings are not driven by an assumption that ACA will lead employers to eliminate jobs or reduce hours, in fact, the report itself says that there is ‘no compelling evidence that part-time employment has increased as a result of the ACA.’ ” The design of the subsidies — like many social safety-net programs — represent “an implicit tax on additional work,” CBO Director Douglas Elmendorf said.
In its new analysis, the CBO said it had reduced its estimate of how many Americans would sign up for the insurance through the online marketplaces “in light of technical problems that impeded many people’s enrollment in exchanges in the first months of the open enrollment period.” The CBO attributed the decline in workforce participation primarily to this effect. But there were other, less important causes, too, including the likelihood that some employers will cut people’s hours, hire fewer workers or offer lower wages to new workers to avoid or compensate for a new fine on employers that fail to offer insurance to employees who work more than 30 hours a week.
The CBO said that the program would catch up over time, with a total of 13 million Americans signing up in 2015 and 24 million by 2017. While the CBO’s assessment of the law’s impact on the labor market generated the most political heat, budget analysts also provided significant updates on the Affordable Care Act’s effects on health coverage.
Late last month, the Obama administration announced that about 3 million Americans had signed up for private health plans so far under the federal health exchange and separate exchanges that are being run by 14 states. The agency predicted that 6 million Americans will have bought private health plans through the new insurance exchanges by the March 31 deadline for obtaining coverage this year, while 8 million low-income people will have enrolled in Medicaid. Both figures are off by 1 million people compared with previous CBO forecasts.
The administration and the CBO agree there should be a surge of sign-ups near the March deadline to apply for coverage in 2014. But enrollment will pick up within a few years, the CBO said, forecasting that enrollment in the marketplaces’ health plans will eventually hover between 24 million and 25 million, while 12 million to 13 million people will be covered through Medicaid and CHIP, the Children’s Health Insurance Program.
The CBO estimated that 84 percent of the U.S. population would have health insurance in 2014, rising to 89 percent within a few years. Medicaid, the program for the poor expanded under the law, should add 6 million more people this year. Despite the glitches, the CBO said 86 percent of American citizens and legal residents younger than 65 will have health insurance this year, up from 82 percent in 2013. And that figure is expected to continue rising, topping out at 92 percent in 2017.
In his statement, Carney highlighted the more positive CBO findings about the health-care law’s impact. “What the CBO report does find is one key immediate effect of the Affordable Care Act is to ‘induce some employers to hire more workers or to increase the hours of current employees’ during the 2014-16 period,” the statement said. The Obama administration has not produced its own enrollment forecasts for coverage under the law, one of the president’s main domestic achievements. But internally and in public forums, the administration’s top health officials have for months been using the 7 million estimate that the CBO issued in May.
At the same time, the CBO reported that the federal budget deficit is rapidly shrinking and is projected to narrow to $514 billion this year, providing fresh evidence that the problem that has been Washington’s obsession for the past several years has become far less urgent. Asked Tuesday whether it was a problem that fewer people are now expected to have insurance this year, White House press secretary Jay Carney, did not answer directly but said, “We’re confident we’re going to have a substantial number of Americans covered both through the exchanges and through expansion of Medicaid.”
Tax increases, spending cuts and faster economic growth have helped close the deficit, which topped $1 trillion for several years following the onset of the Great Recession. Given the hardware and software defects in HealthCare.gov that thwarted many consumers who tried to sign up this fall, Carney said, the impact on enrollment is “certainly not as severe as a lot of our critics hoped and expected.”
The budget deficit would equal 3 percent of the total size of the nation’s economy this year — what many economists see as a healthy level. The deficit is expected to narrow to $478 billion next year, or 2.6 percent of the size of the economy. On Jan. 24, Health and Human Services Secretary Kathleen Sebelius announced that about 3 million people had signed up for private health plans through the federal and state exchanges. The number who have enrolled is not the same as the number who have become insured; people are covered once they pay their first month’s insurance premium, and administration officials have refused to say how many have paid.
One of the more troubling aspects of the CBO report was its assessment of long-term economic growth.
The CBO said that the economy will continue to enjoy a solid recovery for the next several years but will slow to a pace of expansion of 2.2 percent a year from 2018 to 2024.
Much of the slowdown has to do with fewer workers active in the economy — mainly a result of baby boomers retiring.
The slow growth in the economy will reduce taxes by $1.4 trillion of the next years, leading to a wider-than-expected deficit by 2024 $1.07 trillion, or 4 percent of the size of the economy.
The CBO said it would still take until 2017 for the unemployment rate, currently at 6.7 percent, to fall to 5.8 percent, and it may not reach 5.5 percent until 2024.
Today, the agency said, the economy is about 6 million jobs short of where it should be.