Obamacare: 'Job-killer' or freedom from 'job trap'?

Debate is raging over how Obamacare will affect the job market, following a report by the nonpartisan Congressional Budget Office. Here's what the report actually says.

J. Scott Applewhite/AP
House Budget Committee Chairman Rep. Paul Ryan (R) of Wisconsin (c.) flanked by the committee's ranking member Rep. Chris Van Hollen (D) Maryland (r.) and Rep. Tom Price, (R) of Georgia (r.) poses questions to Congressional Budget Office Director Douglas Elmendorf during the committee's hearing on Capitol Hill in Washington, Wednesday, Feb. 5, 2014. Debate is raging over a new CBO report's meaning that predicts nationwide job losses because of the health care program.

Two days after the release of an explosive report from the nonpartisan Congressional Budget Office (CBO), debate is raging over its meaning.

To Republicans, the report told us that Obamacare is a job-killer, because by CBO’s estimate, the law would cause the equivalent of 2 million full-time jobs to disappear by 2017 – and 2.5 million by 2024. To Democrats, the report laid out how the Affordable Care Act (ACA) will liberate people who feel trapped in their jobs.

The arguments are more complicated than that, but it’s an election year, and the rallying cries are set. Republicans are likely to ride “Obamacare is a job-killer” all the way to the Nov. 4 midterms and, they hope, to a takeover of the Senate. Democrats seem destined to play defense on the matter, with an argument that is harder to put on a bumper sticker. Let’s parse the issue:

What does the CBO report actually say?

“The reduction in full-time-equivalent employment that CBO expects will arise from the ACA includes some people choosing not to work at all and other people choosing to work fewer hours than they would have in the absence of the law,” the report says.

These “full time equivalent employment” numbers are derived by projecting the number of hours that will not be worked because of how worker behavior is affected by the law, not because employers are eliminating jobs.

How does the CBO foresee worker behavior changing because of Obamacare?

People with “below-average earnings” could be most affected by the law, the report says, because of the incentives the law creates to reduce work. If a person cuts back on hours of work – reducing their income – and thereby becomes eligible for a federal subsidy to buy health insurance, they might come out ahead financially.

The same holds true for a person who reduces their income and becomes eligible for Medicaid, a federal-state program that provides health insurance for low income people.

Is this a good thing or a bad thing?

To Republicans, this is a bad thing. “Washington is making the poverty trap much worse,” Rep. Paul Ryan (R) of Wisconsin said Wednesday at a House Budget Committee hearing on the CBO report.

Congressman Ryan, chairman of the committee, acknowledged that having health insurance is a good thing. But the tradeoff comes at a cost, he said. A person who forgoes work would miss getting on “the ladder of life to begin working, getting the dignity of work, getting more responsibilities, raising their income, joining the middle class,” Ryan said.

CBO director Doug Elmendorf stated the case more neutrally. “By providing a subsidy, these people are better off, but they do have less of an incentive to work.”

Are there other ways worker behavior might change under the ACA?

Yes. Before the ACA, someone who got their health insurance through their job might have felt trapped, since buying health insurance on the individual market was risky. Insurers could decline to sell you a policy because of a preexisting condition. Or they could sell you a policy, then drop you if you got sick. Now workers cannot be denied coverage or get dropped.

So now a worker who might want to leave a salaried job and start a business or work free-lance has new options when it comes to health insurance.

Is this a good thing or a bad thing?

To Democrats, this is the essence of the CBO report: that the ACA gives workers more options.

“Now, you can go to the exchange and get affordable health insurance and as a result people may choose differently” in their decisions about work, Congressman Van Hollen said.

“The Affordable Care Act does end that job lock,” he continued. “It allows Americans to choose to spend more time with their family or pursue their dreams.”

What does the CBO say about Obamacare’s impact on the economy?

The report says that, over the next five years, the ACA will create a net increase in demand for goods and services.

“Most important, the expansion of Medicaid coverage and the provision of exchange subsidies (and the resulting rise in health insurance coverage) will not only stimulate greater demand for health care services but also allow lower-income households that gain subsidized coverage to increase their spending on other goods and services – thereby raising overall demand in the economy,” the report says.

Does the CBO find that employers have shifted workers to part-time because of Obamacare?

No. “In CBO’s judgment, there is no compelling evidence that part-time employment has increased as a result of the ACA,” the report says.

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