Skip to Main

February 04, 2014

CBO: O-Care Will Cost 2.3M Workers

By Erik Wasson | The Hill

The new healthcare law will cost the nation the equivalent of 2.3 million workers by 2021, contributing to a $1 trillion increase in projected deficits, the Congressional Budget Office (CBO) estimated in a report released Tuesday.

The nonpartisan agency’s report found the healthcare law’s negative effects on the economy will be "substantially larger" than what it had previously anticipated.

The findings immediately roiled the debate over the healthcare law on Capitol Hill ahead of a midterm election that Republicans hope will be dominated by the fight over ObamaCare. It triggered a swift pushback from the White House, which sought to dismiss suggestions from Republicans that the healthcare law has contributed to a slower economic recover or would "kill" jobs.

The White House pointed out that the CBO concluded the reduction in labor participation due to the healthcare law was almost entirely because of workers choosing to work less.

"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 business’ demand for labor," the CBO report said.

It estimates the law will reduce labor force compensation by 1 percent from 2017-2024 – twice the reduction it previously had projected.

This will decrease the number of full-time equivalent workers in 2021 by 2.3 million, the CBO said. It had previously estimated the decrease would be 800,000 for that year. By 2024, the number rises to 2.5 million.

The CBO is not saying employers will fire millions of workers because of the law. It instead found that the healthcare law will create disincentives for people to work and that this in turn will hurt the economy, lower tax collection and cause a higher deficit.

Some people will leave the workforce or reduce their hours in response to lower wages because of the healthcare law, while others will leave or reduce their hours because the have insurance coverage and do not need to work full time to keep it.

Overall CBO is sticking by its earlier analysis that the ObamaCare law, which contained tax increases and Medicare cuts, reduced deficits, however.

"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 though 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."

Republicans seized on the analysis, which also found that technical problems with the website will cause one million fewer individuals to sign up for insurance this year.

They argued it is proof that the healthcare law will hold back the economy.

"This latest diagnosis from the nonpartisan CBO confirms what we have been saying all along – that the president’s health law is bad medicine for jobs and the economy," said Energy and Commerce Committee Chairman Fred Upton (R-Mich.)

"Washington can’t continue to ignore the problem: trillions of dollars in empty promises. And Obamacare is only making things worse," said Rep. Paul Ryan (R-Wis.), the chairman of the House Budget Committee.

In a lengthy statement, White House press secretary Jay Carney defended the healthcare law, rebutting arguments that it is slowing the economy. He criticized the CBO report as incomplete, arguing it fails to take into account the law’s slowing of healthcare costs, which the administration argues will lead to the creation of as many as 400,000 new jobs per year by the end of the decade.

He also focused on the CBO’s finding that people will choose to leave the workforce.

"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," he said, adding "the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity."

A senior administration official joked that repealing Social Security would increase employment, since people on the system would no longer be able to retire and 95-year-olds would be back in the workforce.

Carney also argued the economy had added 8.1 million jobs since the law was signed – the strongest job growth since the late 1990s.

The CBO now thinks the economy will grow at 3.1 percent in this fiscal year, which ends in October, rather than the 3.4 percent growth it predicted last year.

The unemployment rate is projected to fall to 6.7 percent by the end of the year, much lower than the 7.6 percent the CBO saw for 2014 previously. The budget office does not see unemployment falling below 6 percent for the rest of President Obama’s term, however.

CBO’s annual update contained rosier near-term deficit projections, but pointed to problems in the long term.

Instead of adding $6.3 trillion in deficits from 2014 to 2023, the government will add $7.3 trillion, the CBO now projects.

By 2023, the gross debt of the United States will be $26 trillion, up from a projected $25 trillion. A year later, the debt will rise to $27 trillion as the $1.074 trillion deficit for fiscal 2024 is added in.

Most of the change is due to lower economic growth. Congress has actually improved the picture slightly, adopting $20 billion in deficit reduction through the December budget agreement.

In the near term, the CBO is projecting smaller deficits.

For 2014, the deficit is slated to be $514 billion, an improvement of $46 billion from last year’s projection.

In 2015, the deficit estimate falls to $478 billion. That is still higher than the last full year of the Bush administration, when the deficit was $458 billion, but it is a steep drop from the $1 trillion deficits of most of the Obama years.

The CBO also said the botched ObamaCare rollout will result in 6 million people signing up for coverage through the insurance exchanges this year, 1 million fewer than projected last year.

One million fewer people will enroll in Medicaid and children’s health insurance through the healthcare law, and 1 million more people will be uninsured in 2014.

Back to News