TOPICS > Economy

New report forecasts health care reform law will decrease U.S. labor supply

February 4, 2014 at 6:07 PM EDT
In the Congressional Budget Office’s economic outlook report for 2014, analysts predicted that as many as 2.3 million will stop working or work less as a result of the Affordable Care Act. Gwen Ifill talks to NPR’s Julie Rovner about the findings and the political reactions coming from the White House and congressional Republicans.
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TRANSCRIPT

GWEN IFILL: The Congressional Budget Office’s assessment of the economic fallout from the Affordable Health Care Act reignited partisan debate today. The new report focused on the impact the law could have on the labor force, specifically how it could lead to fewer full-time workers over the next decade.

Julie Rovner of NPR has been covering what was in the analysis and the reaction all around.

Reaction by the Republicans, Julie, was that this is a job killer. The reaction from the Democrats was, this was good news. Which is it?

JULIE ROVNER, NPR: Well, I think it was probably neither of those things.

The CBO was very careful in its analysis. Basically, what it said was a little bit more of what it said when it first analyzed the act in 2010, which is that this is the inevitable consequence of when you give people help in buying health insurance, that you’re going to deter work output.

Now, this is not, we should point out, not employers cutting back on workers that they hire. This is largely people not working, people voluntarily either dropping out of the work force or cutting back in the number of hours that they work.

GWEN IFILL: So, there’s a distinction to be drawn between this affecting job supply and worker supply.

JULIE ROVNER: That’s right. This is all on the supply side, not the demand side. These are fewer — in fact, I will read the line that the CBO said: “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 businesses’ demand for labor.”

So these are fewer workers in the work force, not fewer businesses hiring.

GWEN IFILL: The White House was emphasizing that word choice, by the way, repeatedly today, which is I imagine why.

So they said that it’s mostly going to be low-wage jobs, which — or low-wage worker who will be affected by this. Why?

JULIE ROVNER: That’s right, because low-wage workers are the ones who are getting help to buy their health insurance. So, for them, every hour that they work, every extra hour that they work costs them more because, if they work more, they will be at risk of losing that subsidy, or, if they’re getting Medicaid, they would be at risk of losing the Medicaid if they earn that much more.

So they are more sensitive to working more and therefore losing that benefit.

GWEN IFILL: Or if you’re an older worker, it provides an incentive to retire sooner?

JULIE ROVNER: That’s correct. That’s the other half of this. And these were things that were anticipated when the law was passed.

GWEN IFILL: So none of this was an unanticipated or unintended consequence of the law? This was something people saw?

JULIE ROVNER: That’s right. This was — these are — if you’re going to give people money to help them buy health insurance, you’re going to assume that these things are going to happen. As the administration was saying today, if you took away Medicare and Social Security, you would have more 95-year-olds in the work force, too. They would have to work because they wouldn’t have benefits. That might not be what you want, but that is what would happen. So, this is the converse of that.

GWEN IFILL: Now, in this report, it talked about health care costs as well. Do we have any evidence that, as promised, the cost of health care is declining?

JULIE ROVNER: What we do know is that the cost of health care or that the rise in health care spending is slowing. What we don’t know is whether it’s because of the Affordable Care Act.

There’s a very lively debate among health care economists as to the impact that the law is having. The CBO very carefully said we don’t know either. So they’re not going to say.

GWEN IFILL: And there’s also a debate about whether the ACA is actually more expensive than originally anticipated. Do we know the answer to that question?

JULIE ROVNER: The one thing that they said, that the head of the CBO said is that there is no evidence that — when they first estimated how much the bill would cost, they said that it would reduce deficits, because the things that are in the law that raise money are greater than the things that are in the law that spend money, that everything that they have re-estimated, nothing has changed that.

So this would — this law is still anticipated to reduce the federal deficit over these 10 years and I guess the years that follow that. It’s not yet spending more than it takes in.

GWEN IFILL: Now, every week or so, the Department of Health and Human Services, someone comes out and says this is the number of people who have registered with the Affordable Care Act. Because of the botched rollout, is that number less than what was expected?

JULIE ROVNER: Well, right now, they’re at about — the last time they told us, it was about three million. And of course they had been aiming for seven million, which was the seven million estimated by the CBO. Now the CBO has rolled that back to six million. That’s just how much they estimate.

They’re also estimating a million fewer on Medicaid. That’s going to be eight million instead of nine million.

GWEN IFILL: By when?

JULIE ROVNER: By the end of this year.

However, the CBO is also estimating that those numbers — that we will catch up in future years, so that even though this year, rather than getting seven million people signed up in the exchanges, there will only be six million, that in 2015 and 2016, they will catch up to their estimates for those years.

GWEN IFILL: So it’s not a completely — it’s a mixed bag about whether this is doing as expected or not.

One other thing which is interesting which is referred to in this report today is the risk corridors, which — explain, first of all, what they are and then how — what this report says is happening.

JULIE ROVNER: That’s right.

These are payments that are made to insurance companies from the federal government in case they get too many sick people, that if a particular plan gets too many sick people and therefore they don’t have enough premiums to cover their expenses, these are ways — these are safety valves, if you will, for the insurance companies.

Republicans have been talking about repealing some of those because they’re…

GWEN IFILL: They called it an insurance bailout.

JULIE ROVNER: Exactly, an insurance company bailout.

JULIE ROVNER: Right. That would have the impact of probably raising premiums.

However, the CBO said that, in fact, there will be more money coming from the insurance companies to the federal government, the other way around. So it will actually raise $8 billion for the federal government. So if the Republicans want to repeal that, they are going to have to find $8 billion to help pay for that. That could be a problem.

GWEN IFILL: Love this. So do you.

(LAUGHTER)

GWEN IFILL: Julie Rovner of NPR, thank you.

JULIE ROVNER: Thank you.