Unintended consequences: New CBO report on Affordable Care Act



A new report published by the Congressional Budget Office presents some unfavorable information about the implementation of the Affordable Care Act.

The report says that because of the "significant technical problems" that were encountered with the implementation of healthcare.gov, about 1 million fewer people than projected will obtain health care coverage through the exchanges, about 1 million fewer than projected will enroll in Medicaid and CHIP (the Children's Health Insurance Program), and about 1 million more than projected will remain uninsured.

However, the report goes on to say that it's still possible that the number of enrollees will reach the 7 million originally projected for 2014. In any event, it goes on to say the number of people enrolling in the exchanges will rise to 22 million by 2016.

The report also says that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, "almost entirely because workers will choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive."

They project that will mean the loss of 2 million jobs in 2017, going up to 2.5 million by 2024. Although the CBO says that total employment will increase over the next decade, those numbers will be reduced because of the healthcare law.

Why? The CBO says that some (mostly low-wage) workers will opt to drop out of the job market "because given the new taxes and other incentives they will face and the financial benefits some will receive." Translated, that means some would choose to keep Medicaid rather than take a job at reduced wages, while others would delay returning to work in order to keep subsidies for private insurance that are provided under the law.

"All our analysis led us to conclude the effects of the [healthcare law] on labor force participation would be a good deal larger than we had thought originally," CBO Director Doug Elmendorf said. "Fundamentally, the Affordable Care Act provides subsidies to lower income people and those subsidies phase out ... that will have some effects on discouraging labor supply."

But as always, there are caveats, since these are only projections:

CBO’s estimate of the ACA’s impact on labor markets is subject to substantial uncertainty, which arises in part because many of the ACA’s provisions have never been implemented on such a broad scale and in part because available estimates of many key responses vary considerably. CBO seeks to provide estimates that lie in the middle of the distribution of potential outcomes, but the actual effects could differ notably from those estimates.

The White House has responded to the report. You can read the assistant press secretary Jay Carney's release here. In essence he says that the "claims that the Affordable Care Act hurts jobs are simply refuted by the facts in the CBO report."

The report goes on to say that unemployment will remain above 6.0 percent until late 2016.

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