Healthcare Business News

Reform Update: ACA's effect to decrease labor supply was expected, experts say

By Jessica Zigmond
Posted: February 5, 2014 - 4:30 pm ET

The Congressional Budget Office's new estimate that the healthcare reform law will lead to a reduction in the labor supply in the long term is the outcome the law's drafters expected, according to policy experts who offer reasons why that's a good thing.

In its budget outlook Tuesday, the CBO updated its earlier projections and found that provisions in the Patient Protection and Affordable Care Act will cause people to work fewer hours by 2017. By 2024, the CBO said, the U.S. economy will see a reduction in the labor supply of about 2.5 million people.

Republican leaders seized on the report as evidence that the reform law will destroy jobs.

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During a hearing on the report Wednesday, House Budget Committee Chairman Paul Ryan (R-Wis.) highlighted the finding that the Affordable Care Act will cause overall labor compensation to decline between 2017 and 2024, which he said will disproportionately affect lower-wage workers and is an example of Washington making "the poverty trap that much worse.”

Rep. Chris Van Hollen (D-Md.), the ranking Democrat on the Budget Committee, noted that the CBO found that the law will help reduce unemployment in the short term.

But CBO Director Douglas Elmendorf, the sole witness for the hearing, cut through much of the rhetoric and political jockeying when he explained that the CBO is careful not to use the term "lost jobs" in its projections. That's because there is a critical difference between people who can't find a job or lose one and those who choose not to work.

"If someone comes up to you and says, 'Well, the boss said I'm being laid off because we don't have enough business to pay me,' that person feels bad about that and we sympathize with them for having lost their job," Elmendorf said. "If someone comes to you and says, 'I've decided to retire, or I've decided to stay home and spend more time with my family, or I've decided to spend more time doing my hobby'—they don't feel bad about it, they feel good about it," he continued. "And we don't sympathize, we say congratulations.”

And that's the same position the CBO has had all along, said Paul Van de Water, a senior fellow at the left-of-center Center on Budget and Policy Priorities.

"The surprise was that CBO changed its estimate, but CBO tries to do as thorough a job as they can," Van de Water said. "We have to take this estimate seriously, but it's not a fundamental change in any respect in anything they've said before."

In focusing on the long term, Van de Water said, the CBO examined the supply of labor and found that as more people receive health insurance either through the law's Medicaid expansion or insurance exchanges, some workers will opt to cut back on work. For example, the population of 63- and 64-year-olds may decide to retire before they're eligible for Medicare now that they have an alternative form of insurance.

The law's coverage provisions will also provide more freedom of choice to those Americans not nearing retirement, said Sara Collins, vice president of healthcare coverage and access at the Commonwealth Fund in New York. As an example, Collins cited couples who own a small business together and one member of the couple works another job simply for the insurance coverage. In other cases, younger Americans may select the career they truly want or enter graduate school because they are not forced to take a job solely for the insurance coverage.

This is good news, Collins said, adding that the law's drafters wanted people to have options for healthcare coverage other than through their employer. The Affordable Care Act's coverage provisions, Collins said, "allow people to choose positions they are most qualified for, rather than just because they provide health insurance."

IOM event focuses on population health

The Institute of Medicine will host its fifth event on population health on Thursday. Healthcare, public health, housing and social service executives are scheduled to discuss financing for initiatives in population health, broadly defined as the effort to improve overall health and quality of life with strategies to address the medical, economic and environmental needs that can influence health within a community. Under the Affordable Care Act, states including Oregon and Maryland have put forward plans for population health financing and delivery models. Medicare launched accountable care initiatives under the reform law, and ACO executives have cited population health as critical to achieving the health spending slowdown that accountable care seeks.

For more on population health, read Modern Healthcare's piece on efforts in Chicago to address the social determinants of health, and read our recent series on ways that health systems are working to help patients make better choices at home. —Melanie Evans

CMS proposes tougher standard for 'narrow networks'

Health plans that limit consumer choice of hospitals and doctors have emerged as a potentially price-competitive option in the Affordable Care Act's health insurance exchanges.

Consumers are finding that many of the cheapest plans in the marketplaces offer very narrow provider networks. Hospitals and doctors are willing to accept lower rates if they're part of narrow networks that promise a reliable supply of patients.

The CMS, however, is looking for more say over how many providers are included in networks. The agency released a new proposal that would bolster the requirements insurers must meet to ensure networks offer adequate options, Modern Healthcare's Paul Demko reported.

Plans would have to demonstrate at least 30% of “essential community providers” in each market are included in their networks. The threshold this year is 20%. —Melanie Evans

Follow Jessica Zigmond on Twitter: @MHjzigmond

Follow Melanie Evans on Twitter: @MHmevans

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