For Republicans, the latest big report on Obamacare has seemed like a godsend for the 2014 elections.
“Obamacare To Print Even More Pink Slips,” Senate Republicans declared in an email blast. “This Non-Partisan Congressional Budget Office Report Confirms That ObamaCare Will Cost America 2 Million Jobs,” the National Republican Congressional Committee added. The overriding message: Even wonks agree with us that Obamacare is a job-killer.
The problem is, that’s not what the Congressional Budget Office’s (CBO) new numbers are saying.
Here’s the real takeaway from the report: Obamacare will reduce the number of equivalent full-time workers by 2 million in 2017 because employees will be able to receive coverage through Obamacare-subsidized programs and decide to stop working full-time—not because they’re getting “pink slips.” More specifically, the Affordable Care Act contains certain incentives for people not to work full-time because Obamacare subsidies, Medicaid expansion eligibility, and other major parts of the law are calculated according to income.
Some of these workers will decide to go part-time to receive higher subsidies from insurance purchased through the Obamacare exchanges, or to qualify for the Medicaid expansion. Others include workers who will decide to retire earlier than expected, as they’ll no longer be refused coverage because of pre-existing conditions; and disabled workers who will more easily be able to enroll in Medicaid. Overall, these will mostly be lower-wage workers who risk getting priced out of exchange subsidies or Medicaid.
So Obamacare isn’t forcing businesses to hire fewer workers, destroying 2 million jobs in the process. It’s reducing the amount of hours that Americans are choosing to work by about 1.5% to 2%, or the equivalent of about 2 million jobs in 2017 and 2.5 million in 2024. As the CBO explains, “the estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor.” So while the health-care law will push down labor-force participation, it won’t change the labor market by increasing unemployment or underemployment of part-time workers who would rather be working full-time, the report concludes.
That’s not to say that it’s good news for the Affordable Care Act. The CBO’s analysis reveals a very real trade-off in Obamacare: There are ways in which the law does discourage work, given that subsidies are phased out with rising income. That’s happening at a time when labor force participation keeps shrinking, raising questions and concern. But the report doesn’t prove that Obamacare is printing out “pink slips,” as Republicans are claiming.
There is one big disappointment for the health law’s supporters: The CBO expects that 1 million fewer people are expected to enroll in Obamacare in 2014—reducing its total estimate from 7 million to 6 million—largely due to the website’s technical difficulties.
But the report also debunks key arguments from Obamacare’s biggest critics. It finds that the law’s “risk corridors”—which Republicans have recently dubbed the “insurance company bailout”—will actually save the government $8 billion between 2015 and 2017, complicating GOP new efforts to repeal the provision. The report also undermines the popular GOP talking point that Obamacare is already prompting employers to move full-time workers to part-time to avoid having to insure them. “In CBO’s judgment, there is no compelling evidence that part-time employment has increased as a result of the ACA,” the report says, though it suggests that employers may decide to do so when the employer mandate takes effect in 2015. Finally, the report concludes that slower economic growth will increase deficits over the next decade by $1 trillion, largely becaues of reduced labor force participation. But that’s not principally because of the Affordable Care Act, as the law’s critics and some media outlets are claiming. Rather, the CBO writes, “the lower growth relative to that in earlier decades primarily reflects the aging of the population and the leveling off of the labor force participation rate of women in their prime working years.” Additional reporting by Geoffrey Cowley
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