Last year, Modern Healthcare profiled a young New Yorker, Philip Murray, who was grateful the Affordable Care Act allowed him to buy affordable individual health insurance. That let him focus on developing his own software company to help students prepare for the Medical College Admission Test, rather than his having to get a job with health benefits.
The ACA “helps me build a business, be productive, get my product out, and possibly even hire some help,” said Murray, then 33, who did not vote for Barack Obama in either 2008 or 2012. “It's the first time the government has done something that's affected me in an extremely positive way.”
It's important to keep people like Murray in mind when considering the Congressional Budget Office's projection last week that repealing the healthcare reform law would boost economic output by 0.7% from 2021 to 2025—mainly by forcing more Americans to work in order to get job-based health insurance.
Media coverage mostly focused on the CBO's projection that repealing the law would increase the federal deficit by $137 billion over 10 years. The projected deficit increase would have been much larger—$353 billion—if the CBO had only considered the loss of the ACA's tax revenue and Medicare savings.
But, using macroeconomic analysis for the first time, the CBO said repeal would produce an offsetting revenue gain of $216 billion due mostly to more Americans having to work to keep their health insurance and thus pay taxes. That productivity gain would reduce the deficit increase to $137 billion—though the deficit would grow rapidly in the following decade as a result of ACA repeal.
The CBO estimated that the Obamacare repeal so fervently sought by Republicans would boost GDP because the law, which offers subsidized coverage outside of employment, “reduces the supply of labor by reducing some people's incentives to work.”
Republicans generally ignored the finding that repeal would increase the deficit and touted the estimate that it would spur the economy. “CBO has determined what many in Congress have known all along,” said Sen. Mike Enzi (R-Wyo.), chairman of the Senate Budget Committee, who requested the CBO report. “This law acts as an anchor on our economy by dragging down employment and reducing labor-force participation.”
The CBO's projection on labor supply is consistent with its report last year projecting that the ACA would reduce the total number of hours Americans work by 1.5% to 2% between 2017 and 2024—“almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.” It concluded that the law will result in a decline in the number of full-time equivalent workers of about 2 million in 2017, 2.3 million in 2021, and 2.5 million in 2024.
But analysts from both parties have pointed out that if a relatively limited number of Americans leave the job market or reduce their hours due to the ACA's coverage provisions, that could be seen as a plus—both in terms of personal freedom and entrepreneurial opportunity. Bill Hoagland, a former senior Republican legislative aide and now senior vice president of the Bipartisan Policy Center, told Modern Healthcare last year that the ACA has a positive effect in letting people leave jobs they felt locked into because of health insurance and choose other alternatives.
Nobel Prize-winning economist Paul Krugman also argued that freeing workers to leave the full-time labor force can be a good thing. For instance, he wrote, it can mean that a family's second earner can choose to work shorter hours and spend more time taking care of the children if the family is assured of being able to get health insurance. He called that a “compensating non-monetary gain.”
And former CBO Director Douglas Elmendorf told a House panel in February 2014 after his agency released its projections that the ACA could lead to job creation since many newly insured Americans would have more disposable income from spending less on healthcare.
Elmendorf said there's a critical difference between people who can't find a job or lose one and those who choose not to work. When people decide to retire to spend more time with their family or more time doing their hobby, he noted, “they feel good about it … and we say congratulations.”
So a key question raised by the CBO report is whether the projected 0.7% GDP gain that would follow Obamacare's repeal is worth the loss of people's freedom to work less, or not at all.
