The nonpartisan Congressional Budget Office said that the 5-month-old health reform package could ultimately tamp down the job market, largely because of an expansion of Medicaid and federal subsidies meant to help individuals afford insurance.
Reform may shrink labor market: CBO
In an update to its economic and budgetary outlook, the CBO said that the new law would shrink the labor market by about half a percent.
Under the law, Medicaid would expand to include most Americans whose income is below 138% of the federal poverty level, or $10,830 for a single person and $22,050 for a family of four. For the first time, childless adults would become eligible for the program as well.
Additionally, individuals making between 138% and 400% of the federal poverty level will be eligible for tax credits to help them pay for their health coverage in a newly created insurance exchange.
“The expansion of Medicaid and the availability of subsidies through the exchanges will effectively increase beneficiaries' financial resources,” the CBO concludes. “Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market.”
The CBO cites other provisions in the legislation that are likely to diminish people's incentives to work, including measures that prohibit insurers from denying coverage to those who have a pre-existing condition and ones that restrict price variance due to a person's age. Collectively, those provisions could increase the appeal of buying insurance outside of the workplace, leading older workers to retire earlier, the CBO said.
But those measures could be countered by incentives in the legislation meant to bolster the workforce. For instance, the reform package allows parents to work and still receive Medicaid until their income exceeds 138% of the poverty level.
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