Republican presidential candidate Donald Trump claimed in an economic speech Monday that his proposal to repeal the Affordable Care Act would “save” 2 million American jobs. But there are serious problems with that statement.
The Congressional Budget Office tentatively projected in early 2014 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 updated those projections in a second report in December.
The nonpartisan agency said the law will make the labor supply, measured as the total compensation paid to workers, 0.86% smaller in 2025 than it would have been in the absence of that law—totaling about 2 million full-time-equivalent workers. The projected reduction in the labor supply would occur because some people would choose to work fewer hours, while others would leave the labor force entirely or remain unemployed for longer than they otherwise would.
The CBO said the law's premium subsidies and expanded Medicaid program would reduce incentives to work. As people earn more income, they could exceed the income eligibility for Medicaid or premium tax credits. In those situations, some people will choose not to work or will work less.
While the 2014 report immediately became fodder for Republicans opposed to the ACA— who like Trump called Obamacare a job killer—the CBO report itself said “if some people seek to work less, other applicants will be readily available to fill those positions and the overall effect on employment will be muted.”
In congressional testimony, then-CBO Director Douglas Elmendorf told the House Budget Committee that the law could lead to job creation since many newly insured Americans would have more disposable income from spending less on healthcare.
Elmendorf made it clear that CBO analysts do not use the term “lost jobs” in their projections because, he said, there's a critical difference between people who can't find a job or lose one and those who choose not to work. He said that when people decide to retire to spend more time with their family or more time doing their hobby, “They feel good about it … and we say congratulations.”
Beyond that, ACA supporters argue that the law has boosted entrepreneurialism and job creation by, for instance, allowing people to quit their jobs with health benefits and start their own small businesses knowing they can buy coverage on their own through the ACA's subsidized exchanges, protected by the law's rules barring denials based on pre-existing medical conditions.
Trump's comment Monday also ignored evidence that the law's Medicaid expansion has boosted economies, added jobs and improved budgets in the states that have taken up 100% federal funding for coverage of low-income adults. A new report from the Urban Institute and the Commonwealth Fund says expansion states have found that state cost increases resulting from higher caseloads under Medicaid expansion are outweighed by state cost savings and revenue growth that result from expansion.
A study released early last year by Deloitte Consulting and the University of Louisville found that Kentucky's decision to expand Medicaid will lead to 40,000 added jobs and add $30 billion to the state's economy through 2021, with a net positive impact of $820 million to state and local government budgets.
There's also evidence that extending Medicaid coverage to low-income adults has not affected their labor market participation, contrary to the fears of some observers. A study published in Health Affairs in January found that Medicaid expansion did not result in significant changes in employment, job switching, or full- versus part-time status, with limited overall impact on labor-market outcomes thus far.
In addition, it's important to remember that healthcare hiring has been a consistent strength this year for the U.S. labor market. Experts believe the ACA coverage expansion, which has sharply reduced uncompensated care provided by hospitals, has played a significant role. Almost 275,000 healthcare jobs were added in the first seven months of 2016.
So it's fair to say that Trump oversimplified and even misrepresented the employment and economic impact of the ACA.
Maybe we'll get a clearer picture when the Republican nominee presents the long-awaited details of his plan to repeal and replace Obamacare, which he promised Monday that he would provide in a future economic speech.
