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Health Care Law Projected to Cut the Labor Force

02/05/2014

NYTimes.com, February 4, 2014. WASHINGTON — A Congressional Budget Office analysis released Tuesday predicted that the Affordable Care Act would shrink the work force by the equivalent of more than two million full-time positions and recharged the political debate over the health care law, providing Republican opponents fresh lines of attack and putting Democrats on the defensive.

The nonpartisan budget office’s analysis, part of a regular update to its budget projections, was far more complicated than the Republican attack lines it generated. Congressional Republican leaders called the findings “devastating,” “terrible” and proof that the health care law was a job killer.

The report did say that the law would reduce hours worked and full-time employment, but not because of a crippling impact on private-sector job creation. With the expansion of insurance coverage, the budget office predicted, more people will choose not to work, and others will choose to work fewer hours than they might have otherwise to obtain employer-provided insurance. The cumulative reduction of hours is large: the equivalent of 2.5 million fewer full-time positions by 2024, the budget office said.

The report “rightfully says that people shouldn’t have job lock,” said Senator Harry Reid of Nevada, the Democratic leader. “We live in a country where we should be free agents. People can do what they want.”

He continued: “Republicans talk about losing millions of jobs. That simply isn’t true.”

But Republicans, even those versed in the nuances of the budget reports, did not hold back. Senator Roy Blunt of Missouri, a member of the Republican leadership, acknowledged the administration’s position: that the coming decline in the work force could be the result of workers’ choosing different career paths. But, he noted, the budget office previously projected a far smaller impact.

“No matter how you calculate this number or how the administration tries to explain it away, it’s about two and a half times as high as the number was when they looked at it the first time,” Mr. Blunt said. “They can say anything they want, but this number is a lot worse than anybody thought.”

Republicans seized on the report as evidence of the health care law’s adverse effect on the economy.

“For years, Republicans have said that the president’s health care law creates uncertainty for small businesses, hurts take-home pay and makes it harder to invest in new workers,” Speaker John A. Boehner said. “The middle class is getting squeezed in this economy, and this C.B.O. report confirms that Obamacare is making it worse.”

Democrats clearly understood the political damage the report could have. Senator Jeanne Shaheen, a Democrat facing a tough political environment for her re-election bid in New Hampshire, told reporters, “You guys are going to politicize it no matter what happens.”

Senator Joe Manchin III, Democrat of West Virginia, who has embraced a number of bills to tweak the health care law, called disappointing enrollment figures and work-force declines the law’s “Waterloo.”

“Pretty soon the numbers don’t line up and the math doesn’t equal out, and you have to make some adjustments,” he said. “You do it every day in your life. The government’s got to do it.”

The budget office analysis found that the law, in effect, nudges workers to work less. The insurance expansion reduces the need for a person to take a full-time job just to get coverage. The premium subsidies effectively bolster household income. Higher taxes for richer households also reduce the incentive to work.

But it will also have an effect on businesses, the report said, including by encouraging them to reduce employee hours to avoid the “employer mandate.” The overall demand for labor would not change, in other words, but businesses might arrange their workers’ schedules differently to avoid having to provide them with health care.

The report stressed that there seemed to be no effect on part-time employment yet; the law’s penalties on businesses that fail to provide insurance for workers do not hit until 2015.

The White House pushed back against the Republican attacks, arguing for the nuance contained in the budget office report.

“Claims that the Affordable Care Act hurts jobs are simply belied by the facts,” said the White House press secretary, Jay Carney. “The report itself says that there is ‘no compelling evidence that part-time employment has increased as a result of the A.C.A.’ ”

The budget office also estimated that about a million fewer Americans than expected would receive health insurance coverage this year through the marketplaces established by the Affordable Care Act, primarily because of the troubled rollout of the exchanges. It also revised its estimates of the number of people receiving coverage through Medicaid and Children’s Health Insurance Plan coverage, lowering it by about one million.

The budget office now estimates that six million Americans will enroll through the exchanges in their first year, rather than seven million, and that expanded Medicaid and other public programs will enroll eight million Americans, rather than nine million.

But the long-term effect of the problems with the rollout remains unclear, the budget office said, declining to alter its coverage projections for later years.

“Over time, more people are expected to respond to the new coverage options, so enrollment is projected to increase sharply in 2015 and 2016,” the budget office said in its report. It estimates that as of 2017, about 25 million Americans will obtain coverage on the exchanges.

The news in the report is not all bad for Democrats. The office also sees the budget deficit falling to $514 billion in the 2014 fiscal year, or about 3 percent of economic output, from $1.4 trillion in 2009. Many economists consider deficits of that size to be sustainable in the long term.

The budget office sees the deficit continuing to drop in the 2015 fiscal year, to $478 billion, or about 2.6 percent of economic output. From there, though, it anticipates that the deficit will rise again as government spending picks up, absent congressional action.