February 6, 2014

CBO: Health Care Law Costs U.S. Economy

Before the President signed his health care bill into law, Democrats claimed the proposal would create jobs. House Speaker Nancy Pelosi infamously declared: “So this bill is not only about the health security of America, it’s about jobs. In its life it will create four million jobs – 400,000 jobs almost immediately.” Independent analysis quickly contradicted her statement. By August 2010, the non-partisan Congressional Budget Office was predicting the health spending law would reduce the labor supply by the equivalent of 800,000 jobs.

Earlier this week, CBO released its 2014 Budget and Economic Outlook, which updates the federal government’s long term spending projections over the next 10 years. CBO’s forecast delivered one crushing blow – Obamacare’s flawed policy disincentives are expected to, effectively, drive 2.5 million people out of the workforce by 2024. That figure is nearly triple the impact CBO previously estimated in 2010. Democrats’ health care law forces Americans to decide if they want to work more, earn higher wages, but potentially lose generous government subsidies; or if they want to work less, earn lower salaries, and retain government benefits.

While Obamacare’s labor workforce impact garnered significant news attention, the CBO report contains more bad news:

  • 1 percent: The amount CBO predicts the health care law will reduce aggregate labor compensation. CBO also estimates the health law will reduce the total number of hours worked by 1.5 percent to 2 percent from 2017 to 2024 – hitting lower wage workers hardest. CBO translates the decrease in hours worked to a full-time employment reduction estimate of about 2 million in 2017, rising to 2.3 million in 2021, and reaching about 2.5 million in 2024.
  • 6 million: The number of people CBO says will enroll in Obamacare’s exchanges in 2014. CBO cites the law’s bungled rollout as the main cause one million fewer people are expected to sign up.
  • 8 million: The number of people CBO estimates will enroll in Medicaid and SCHIP in 2014. CBO again cites the law’s disastrous implementation – specifically a lag in the federal exchange transferring application eligibility information to state agencies – as the reason one million fewer people are expected to sign up.
  • 13 million: The number of people who will be locked into a broken and failing Medicaid program by 2024.
  • 5 million: The number of people expected to buy health insurance in an Obamacare exchange who are not eligible for a subsidy to help pay for Democrats’ more expensive coverage. Average taxpayer-funded subsidies for people in the exchanges will increase by 78 percent – from $4,700 in 2014 to $8,370 in 2024.
  • 7 million: The number of people who will lose their employer-sponsored health insurance by 2024.
  • 31 million: The number of people who will remain uninsured in 2024. CBO projects Obamacare will not reduce the number of uninsured below 30 million people over the next decade.
  • $52 billion: The total amount, over 10 years, that Obamacare taxes the uninsured, through the individual mandate tax.
  • $151 billion: The total, over 10 years, that Obamacare taxes employers who do not offer health insurance to their workers, through the employer mandate tax.
  • 1.5 million: The number of people, of the roughly five million whose health insurance plans have been cancelled in the individual and small group markets, who are expected to renew their non-Obamacare compliant policies in 2014.
  • 15 percent: How much Democrats may claim CBO lowered its cost estimate of the average premium cost in 2014. In reality, CBO says average premiums are lower relative to the agency’s original cost estimates of the law’s expected premium rates – not relative to what the American people’s health insurance premium rates were before Obamacare’s implementation.

CBO’s analysis spells disaster for Washington Democrats. Reeling from “the worst headline for Democrats this year,” the White House actually argues that CBO’s report proves the health care law will save people from being “trapped in a job.” Remember that Washington Democrats originally advertized the health care law as a way to stop “job lock” by giving Americans the chance to move to a different job and retain health insurance. Democrats never promoted the law as encouraging some people to simply drop out of the workforce. But all spin aside, even liberal pundits have been forced to admit that Obamacare is “a drag on economic growth … as more people decide government handouts are more attractive than working more and paying higher taxes.” The President and Washington Democrats should be doing everything possible to spur job creation. Instead they stubbornly continue to implement a health care law that threatens our economic recovery, increases costs, and limits job growth.

Health Care Headlines

Wall Street Journal: “Insurers Face New Pressure Over Limited Doctor Choice” Insurers are facing pressure from regulators and lawmakers about plans that offer limited choices of doctors and hospitals, a tactic the industry said is vital to keep down coverage prices in the new health law's marketplaces. This week, federal regulators proposed a tougher review process for the doctors and hospitals in plans to be sold next year through HealthCare.gov, a shift that could force insurers to expand those networks.

National Review Online: “Incentives Matter: Why Estimated Job Losses Under Obamacare Have Tripled” The CBO upped the number of work hours lost due to Obamacare by a lot – in fact, they tripled their previous estimate. Work hours can be lost by employers reducing the number of jobs, but also people voluntarily dropping out of the labor force or not working as much.

Gallup: “Majority of Americans Still Disapprove of Healthcare Law” The latest results, from a Gallup poll conducted Jan. 31-Feb. 1, show that even though many provisions of the law are now in effect, Americans’ views of Obamacare still tilt negative.

Bloomberg: “Obamacare Wonks Flunk Data Analysis” When the ACA was being drafted, the wonks behind it were excited by the opportunity to experiment with new ways to deliver services more cheaply and effectively. So the law contained provisions that were supposed to help us get there by trying new approaches and seeing what worked. But the Administration’s approach to data analysis may be too weak to get good results from these experiments.

American Action Forum: “The ACA’s Risk Spreading Mechanisms: A Primer on Reinsurance, Risk Corridors, and Risk Adjustment” A primer on the ACA’s risk mitigation provisions that apply to individual and/or small group market plans: reinsurance, risk corridors, and risk adjustment.

Issue Tag: Health Care