Report: Health law will reduce workforce

Democrats controlling the Senate have set up a test vote on Thursday for the party’s new plan to extend unemployment benefits for people who have been out of work for more than six months. The latest plan would extend long-term jobless benefits for three months at a cost of almost $7 billion. Democrats control the Senate with 55 votes and so far expect to get the support of just three Republicans — Susan Collins of Maine, Dean Heller of Nevada and Lisa Murkowski of Alaska — leaving them shy of the 60 votes needed to overcome an expected GOP filibuster.

Associated Press


“The estimated reduction (in future employment) 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 it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment … or underemployment. … (The) estimate … reflects some of the inherent trade-offs involved in designing such legislation. Subsidies that help lower-income people purchase an expensive product like health insurance must be relatively large to encourage a significant proportion of eligible people to enroll. If those subsidies are phased out with rising income in order to limit their total costs, the phaseout effectively raises people’s marginal tax rates … thus discouraging work. … Alternatively, if subsidies are not phased out or eliminated with rising income, then the increase in taxes required to finance the subsidies would be much larger.”

The Budget and Economic Outlook: 2014 to 2024 (Congressional Budget Office)

Several million American workers will reduce their hours on the job or leave the workforce entirely because of incentives built into President Barack Obama’s health care overhaul, the Congressional Budget Office said Tuesday.

That would mean losses equal to 2.3 million full-time jobs by 2021, in large part because people would opt to keep their income low to stay eligible for federal health care subsidies or Medicaid, the agency said. It had estimated previously that the law would lead to 800,000 fewer jobs by that year.

Republican lawmakers seized on the nonpartisan report as major new evidence of what they consider the failures of the law.

It’s the latest indication that “the president’s health care law is destroying full-time jobs,” said Republican Rep. John Kline of Minnesota, chairman of the House Education and the Workforce Committee. “This fatally flawed health care scheme is wreaking havoc on working families nationwide.”

But the White House said the projected reduction would be the result of voluntary steps by workers, such as taking early retirement, rather than businesses cutting jobs.

“CBO’s findings are not driven by an assumption that (the health care law) will lead employers to eliminate jobs or reduce hours,” said White House Press Secretary Jay Carney.

The agency, which provides budget and economic data for both Republican and Democratic lawmakers, also reduced its estimate of the number of uninsured people who will get coverage through the health care law. The budget experts now say more than 1 million fewer people than had been expected will gain coverage this year, partly because of the website problems that prevented people from signing up last fall.

However, it wasn’t all bad news for the Obama administration. The CBO’s wide-ranging report predicted that the federal budget deficit will fall to $514 billion this year, and to $478 billion next year, down from last year’s $680 billion and the lowest by far since Obama took office five years ago.

The report noted that the premiums people are paying to buy coverage on the law’s health insurance exchanges are coming in about 15 percent lower than projected, and that the health care law, on balance, still is expected to reduce the federal deficit.

However, the budget experts see the long-term federal deficit picture worsening by about $100 billion a year through the end of the decade because of slower-than-predicted growth in the economy than they had previously predicted. Overall, it forecasts deficits totaling $7.3 trillion over the coming decade, about $1 trillion more than previously estimated.

“CBO expects that economic growth will diminish to a pace that is well below the average seen over the past several decades,” the report said, citing an aging population and a decrease in the rate of growth in the labor force.


With regard to the health law, the CBO estimated that the number of people enrolling through the new insurance exchanges this year will total million, about 1 million less than previously expected. Enrollment is predicted to pick up in subsequent years, topping 20 million in 2016.

The report also lowered by 1 million an estimate of the number of people expected to enroll in Medicaid under the law, to a total of 8 million this year. About half the states have accepted the health law’s Medicaid expansion.

As for the decline in job numbers expected under the law, the report said that while some employers will choose not to hire additional workers, or will reduce hours, to avoid coverage mandates, that does not appear to be the main factor.

“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,” the report said.

The report contains an important caveat: that the estimate of job losses is “subject to substantial uncertainty” and could be larger or smaller than predicted. There now are more than 130 million jobs in the economy.