The Congressional Budget Office said on Tuesday in a report that President Barack Obama’s healthcare law will reduce American workforce participation by the equivalent of 2 million full-time jobs in 2017, a finding that could fuel Republican efforts to paint the law as a job killer.
The nonpartisan CBO said the health law would prompt some lower-income workers to limit their hours to avoid losing federal subsidies that are available under the law to help pay for health insurance.
The White House quickly disputed the conclusion that the law will hurt jobs in 2017, claiming the same report predicts Obamacare will lead to a boost in hiring during the 2014-2016 period.
The CBO said the biggest impact on work hours from the health law would begin in 2017 because major provisions of the law will be well under way by then. The CBO said there would be smaller declines in work hours that would occur before then.
Work hours would be reduced by the equivalent of 2.5 million jobs in 2024, the agency said.
Republicans have long argued that the Patient Protection and Affordable Care Act (ACA) is a job killer that would discourage employers from hiring full-time workers.
“The ACA also will exert conflicting pressures on the quantity of labor that employers demand, primarily during the next few years,” the agency said.
But CBO said the expected drop in work hours between 2017 and 2024 would result largely from worker decisions not to participate in the labor force, rather than from higher unemployment or the inability of part-time workers to find full-time hours.
“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,” CBO said.
According to the report, federal subsidies can be substantial, particularly for lower-wage workers who receive more under the law’s sliding income scale. But that also means the benefits can be phased out as a worker’s income rises.
“The phaseout effectively raises people’s marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work,” CBO said.
The agency also said that if higher taxes were required to pay for subsidies, the effect would also be to discourage work and create other economic distortions.
The White House refuted arguments that Obamacare reforms will hurt jobs, and said the new report from the Congressional Budget Office finds the reforms will spur hiring during the 2014-2016 period.
“Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report,” the White House said in a statement about the report.
According to the White House, since the Affordable Care Act became law in March 2010, the private sector has added 8.1 million jobs, which it said the strongest 45 month job growth since the late 1990s and contrasts with the 3.8 million private sector jobs lost in the decade before the ACA passed.
The White House statement further 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 White House said that the CBO report does find that one key immediate effect of the ACA is to “induce some employers to hire more workers or to increase the hours of current employees” during the 2014-16 period.
“Over the longer run, CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families. At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams. This CBO report bears that out, and the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity,” the White House said.
In addition, the White House said, the CBO confirms that its analysis is incomplete and it does not consider that ACA’s slowing health care costs has been estimated to cause the economy to add an additional 250,000 to 400,000 jobs per year by the end of the decade. Also, the White House said, CBO does not take into account “positive impacts on worker productivity due to the ACA’s role in improving workers’ health, including reduced absenteeism.”
Finally, the White House said that the CBO continues to confirm that the ACA is projected to reduce the deficit by more than $1 trillion over the next two decades.
The CBO said the healthcare law is not expected to reach its initial goal of enrolling 7 million uninsured Americans in health insurance this year, due to its botched rollout.
In a fresh forecast for 2014, the CBO estimated that only 6 million people would sign up for private coverage through new health insurance marketplaces. Technical problems that largely paralyzed the website HealthCare.gov after its initial rollout discouraged many Americans from enrolling.
Insurance Journal expanded upon Reuter’s original article.