As a nonpartisan agency, the Congressional Budget Office has to tread lightly when it tells any of its clients on Capitol Hill that they’re full of it. So the agency’s remarks Monday about the employment impact of the Affordable Care Act is remarkable for its bluntness, even if it is spelled out with the CBO’s customary tact.
The question the CBO addresses is whether it said in a report last week that the ACA would lead to people losing their jobs (the GOP takeaway from the report). Here’s how the agency answered in an online post Monday:
“Q: Will 2.5 Million People Lose Their Jobs in 2024 Because of the ACA?
“A: No, we would not describe our estimates in that way.”
The CBO goes on to underscore what it did say, which is that the total number of hours worked would decline by 1.5 percent to 2 percent by 2024, “almost entirely because workers will choose to supply less labor.”
That signifies a combination of workers cutting back hours to raise their families, leaving jobs to retire before they’re eligible for Medicare, or giving up employer-provided health care to start new businesses. Americans are newly empowered to make these choices because the ACA ensures that they no longer have to give up health insurance to make them.
Traditionally, these choices have been viewed by Democrats and Republicans alike as virtues of any plan to unlink health insurance from employment, a linkage that is far more dominant in the United States than anywhere else in the industrialized world. For years, ending what’s known as job lock has been a stated goal of conservatives like Rep. Paul Ryan, R-Wis., and Mitt Romney. In 2008, the principle was described by the conservative Heritage Foundation as “more power for families.”
But then it got put into practice by Obamacare, and suddenly it’s all about depriving people of “the dignity of work” (Ryan again, at a committee hearing last week). Read between the lines, and he’s calling those who take advantage of the ACA to acquire health insurance without being tied to their jobs as slackers.
A fourth category of beneficiaries of the ACA mentioned by the CBO and conservatives are recipients of government subsidies for premiums and other medical costs. They’re concentrated at the low end of the income scale — premium subsidies end when income exceeds 400 percent of the federal poverty line — which drives conservatives up the wall. That’s because means-tested government benefits act as a disincentive to work; the higher your income, the lower your benefit, so at the margin it may not pay to add hours.
A couple of important points about this. First, that’s true of any means-tested program, and there’s no way around it. Benefits have to be reduced or ended somewhere. If the GOP thought the ACA’s margin was set too low, it could vote to continue the subsidies to higher income levels. But that would cost money.
The other point is that in this case, they have things upside-down. The ACA is designed to allow low-income workers to work more without losing their benefits. It’s not a “poverty trap,” as Ryan described it, but the opposite.
The key is the Medicaid expansion built into the law. Thanks (unfortunately) to the Supreme Court, which made the expansion a state-level option, we can see how it works today. In states that accepted the expansion, the Medicaid subsidy is available to households earning up to 138 percent of the poverty line.
In states that turned it down (mostly Southern states with GOP-controlled governments), the income ceiling for Medicaid is much lower — as low as 16 percent of the poverty line in Alabama. The average for all those states is 47 percent of the poverty line. In all but one (Wisconsin), only parents of dependent children or disabled persons are eligible for Medicaid at all. The ACA, however, expanded Medicaid to childless adults, too.
In Alabama, the Medicaid rules mean that a family would lose Medicaid benefits for its parents once their income exceeded $3,125 for the year. As economist Jared Bernstein of the Center on Budget and Policy Priorities put it, “That, Mr. Ryan, is a poverty trap.” If Alabama accepted the Medicaid expansion, however, that family could earn $26,951 without anyone losing eligibility.
The CBO makes the point in its FAQ that it chose its words carefully in describing the employment effects of the ACA. The agency was deliberately nuanced, because the employment effects are a mishmash of pluses and minuses, and very hard to pinpoint in any case.
“To be clear,” the CBO concluded, “total employment and hours worked will increase over the coming decade, but by less than they would have in the absence of the ACA. In the next few years, as we wrote in the report, the ACA ‘also will affect employers’ demand for workers … both by increasing labor costs through the employer penalty (which will reduce labor demand) and by boosting overall demand for goods and services (which will increase labor demand).’ ”
A tradeoff between giving people more life choices and paying for those choices through taxes is inherent in any effort to expand access to health insurance, the CBO concluded. Whether that’s good or bad for the country is a matter of judgment. The CBO’s message is that it’s up to lawmakers and voters to make that judgment, but at least they should start with an accurate picture of what’s going on.