Republicans were handed a giant gift this week when the director of the Congressional Budget Office testified to Congress that the health care law will actually lead to fewer people working — presumably meaning that repeal would boost jobs.
But it’s worth taking a closer look at why those jobs will disappear under the health care law. It’s not so much that employers would fire workers as that the new generous government benefits in the law will entice more people to drop out of the labor market altogether.
In a long discussion last summer of the economics of health care, CBO said expanded Medicaid and the subsidies to help middle-income families buy insurance will actually lead some people to believe they are better off not working, or working less.
“Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market. In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work,” CBO said at the time.
The math is pretty complex. CBO said the fact that companies can no longer deny coverage for preexisting conditions means some older workers, who were hanging onto their jobs because they were guaranteed coverage, will retire earlier than they would have otherwise.
On the other hand, an income cap in Medicaid currently discourages some parents from working, but the new law doubles that cap on average across the states, meaning parents could earn more while not losing eligibility.
CBO Director Douglas Elmendorf summed up the net effect of those numbers on Thursday when he testified to Congress that the law would reduce employment.
“The way I would put it is that we do estimate, as you said, that household employment will be about 160 million by the end of the decade. Half a percent of that is 800,000,” Mr. Elmendorf said.