ADEA Washington Update

Congressional Budget Office Report Fuels ACA Debate

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A February 4 report by the Congressional Budget Office (CBO) on the impact of the Affordable Care Act (ACA) on the U.S. labor market set off a firestorm on Capitol Hill when it estimated that by 2024 some 2.5 million Americans who would have previously counted on a job for their health insurance will no longer decide to work or will shorten their hours. Both Democrats and Republicans pounced on the numbers as significant, but came up with opposing reasons for why that was the case.

The White House moved quickly to defend the CBO numbers, which it says prove the ACA is functioning as planned by allowing people to purchase health care without forcing them to remain at a job solely to access health benefits. This frees them up to stay at home to take care of their children, start a new business, or retire early. “The Affordable Care Act today, right now, is helping labor markets, is helping businesses and is helping jobs,” said Jason Furman, the president’s chief economist.

Republicans, however, interpreted the figures as another sign that the law — which mandates lower premiums for coverage and subsidizes the cost of health insurance for lower income individuals — will shrink the U.S. workforce by providing an incentive not to work. “Today’s CBO report gives a sobering outlook on our economy,” said Sen. Bob Corker (R-TN) in a statement. “It confirms what we’ve known all along: the health care law is having a tremendously negative impact on economic growth.”

The CBO report generated such a maelstrom of confusion that the widely respected non-partisan office felt compelled to post a blog clarification five days later by CBO Director Douglas Elmendorf, which ran counter to the GOP interpretation. Asked whether 2.5 million people would lose their jobs by 2024 because of the ACA, Elmendorf wrote: “No, we would not describe our estimates that way.” The 2.5 million figure, explained Elmendorf, signified the expected decline of a labor supply untethered from traditional employer-based access to health coverage, not a drop in business’ demand for labor.  The ACA subsidies, he wrote, “effectively boost the income of recipients, which will lead some of them to decide they can work less and still maintain or improve their standard of living.”

The ACA will invariably be a key issue in midterm congressional elections this fall. Republicans will likely continue to hold Democrats to the fire with the website’s initial launch challenges, while Democrats will attempt to focus voter attention on the millions of Americans who now have coverage for the first time.

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