New estimates on ACA and employment

by on February 4, 2014 at 10:32 am in Current Affairs, Economics, Law, Medicine | Permalink

The Affordable Care Act will also reduce the number of fulltime workers by more than 2 million in coming years, congressional budget analysts said in the most detailed analysis of the law’s impact on jobs.

The CBO said the law’s impact on jobs would be mostly felt starting after 2016. The agency previously estimated that the economy would have 800,000 fewer jobs as a result of the law.

The impact is likely to be most felt, the CBO said, among low-wage workers. The agency said that most of the effect would come from Americans deciding not to seek work as a result of the ACA’s impact on the economy. Some workers may forgo employment, while others may reduce hours, for a equivalent of at least 2 million fulltime workers dropping out of the labor force.

That is from The Washington Post.

Addendum: Annie Lowrey adds comment.

Scott Swank February 4, 2014 at 10:42 am

Who are these people? Are they people who want to retire but can’t get insurance without a full-time job? Or are they likewise people who want to go to college full-time or be stay-at-home parents?

yenwoda February 4, 2014 at 12:30 pm

Seems like they are mostly people who are working full-time specifically to take advantage of the employer-based insurance subsidy. That includes people approaching retirement but also (more) low income workers. Post-ACA “the cost of forgoing exchange subsidies operates primarily as an implicit tax on employment-based insurance”, and there is a similar effect regarding expanded Medicaid eligibility. The CBO cites other channels as well, including the insurer mandate and top marginal tax rate increase, although I don’t think those affected the change in forecast as much.

The link is here, slightly odd that an economist would point to the WaPo when the primary source is readily available:

http://cbo.gov/publication/45010

Squarely Rooted February 4, 2014 at 12:36 pm

It is perfectly acceptable, and moreover highly professional, to cite not merely the original source of the analysis but also the intermediary source which first exposed you to the information in question. It would reduce credit due to Wonkblog for Tyler to first discover this CBO analysis on their website but then bypass them in passing the information along to his readership. Additionally, if their summary is useful and well-written, there is no reason to reinvent the wheel.

yenwoda February 4, 2014 at 1:22 pm

I don’t think the article is from WonkBlog, and I think tipping the hat is more appropriate between bloggers than when the middleman is a major news site, but to each his own. WaPo didn’t link to the original document or provide much in the way of analysis explanation, which I think makes it incumbent upon Tyler to do at least one of those things.

Brian February 4, 2014 at 10:49 am

Tradeoffs. Tanstaafl.

tt February 4, 2014 at 11:03 am

i hope they are economists

Jane the Actuary February 4, 2014 at 11:13 am

Whoever these people are (and don’t forget, this also includes people involuntarily working part-time), this means that there are significantly more people who will be making use of the subsidies than forecast.

Slocum February 4, 2014 at 11:26 am

I think we have to assume that a sizable fraction of these people will be early retirees who aren’t yet eligible for Medicare. These folks are quite expensive to insure and their low, post-retirement incomes will tend to make them eligible for maximum subsidies. Seeing this, some companies (and even government entities) that currently provide retirement health benefits will stop and instead provide cash for their retirees to buy (heavily subsidized) plans on the exchanges. All of this is going to cost the system a lot of money (enough that I wouldn’t be surprised if it turned out to be ‘cheaper’ to lower the medicare eligibility age to 60 or 62).

We live in interesting times February 4, 2014 at 11:54 am

Maybe it’s time to be means-tested? It seems we are quickly reaching the point of restructuring.

Marie February 4, 2014 at 12:04 pm

If a person over 55 moves to Medicaid from a canceled policy, an uninsured situation, or a work situation with insurance, then anything Medicaid pays for them is retrievable from their estate after their death.

Since you can’t get on subsidies unless your income is a certain level (over 133 or 138% FPL), this is going to be a factor for many in this early semi-retirement situation.

We live in interesting times February 4, 2014 at 12:09 pm

Wait until that starts sinking in. I’ve worked and paid taxes all these years and when I finally need it, I have to pay it back?

Slocum February 4, 2014 at 12:22 pm

“Since you can’t get on subsidies unless your income is a certain level (over 133 or 138% FPL), this is going to be a factor for many in this early semi-retirement situation”

Right, but if they have a 401K, then once they reach 59 1/2, they can top up their other income with 401K withdrawals to get out of the medicaid range.

Jan February 4, 2014 at 1:03 pm

Depends on the state.

Marie February 4, 2014 at 1:12 pm

@Jan,
Yes. It is allowed by federal law, but not required.
Last I googled, 23 of the states with expanded Medicaid still have a provision of one degree or another. Some just nursing home costs?

Dave Anthony February 4, 2014 at 1:26 pm

“We live in interesting times”

Sure you worked and paid taxes all these years, but then you never demanded that your federal government actually save any of that money to pay out on these programs. Because they never saved any of it, and never made any returns on the savings, the money you paid in is worth only a fraction of what will be paid out to the average retiree in medicare and social security benefits.

I think recovering the money paid out in medicare from the estate, postmortem, is a fantastic idea.

JWatts February 4, 2014 at 11:13 am

“The agency said that most of the effect would come from Americans deciding not to seek work as a result of the ACA’s impact on the economy. ”

This statement doesn’t really make much sense to me. Will the primary result be that people will decide not to work as many hours because of the law, or that employers will decide to work employees less hours due to the effects of the law? And did they make an estimate of the ratio.

Also,
“Six million Americans will sign up for coverage under President Obama’s signature health care law, rather than the 7 million previously estimated,”

Color me skeptical. The assumption is that yes we are 1 million behind at this point but other than that offset the trend line will remain exactly as it was predicted to be in May of 2013. That seems like an improbable assumption.

“The CBO said that the program would catch up over time, with a total of 13 million Americans signing up in 2015 and 24 million by 2017.”

And this seems even more unlikely. These are exactly the same numbers they estimated in May of 2013. So, basically they are saying that the current situation with a poor enrollment system, higher than expected deductibles and far more individuals losing their private coverage than expected, don’t impact the estimates at all.

Curiously, the CBO’s original estimate for individuals losing their coverage was 2013:0 2014:2 & 2015:3 million. And yet we’ve already had more than 5 million individuals lose their coverage. The CBO’s estimates are beginning to look far fetched.

May 2013 CBO estimates: http://www.cbo.gov/sites/default/files/cbofiles/attachments/44190_EffectsAffordableCareActHealthInsuranceCoverage_2.pdf

Jay February 4, 2014 at 11:41 am

+1

To your first point, I believe that is WashPo’s mealymouthed way to say that the law will cause businesses not to hire entry level (young) people at full-time, but they do an end around and say those young people will expect this to happen and not seek the jobs. The way they phrase can be interpreted as it sounds like the young will be doing so well in the great ACA economy that they won’t need jobs.

Also, are we really only 1 million behind expectation? I thought it was significantly worse than that.

JWatts February 4, 2014 at 12:13 pm

“Also, are we really only 1 million behind expectation? I thought it was significantly worse than that. ”

I don’t believe that anyone outside the administration really knows, because the raw data hasn’t been released.

Here’s one way to look at the data. The CBO estimated that the combined 2013+2014 Medicaid and CHIP enrollment would be +10 million and the combined 2013+2014 exchange enrollment would be +7 million.

As of the start of this year the best estimates are: +7.4 million Medicaid and CHIP & +2.1 million exchange
http://www.latimes.com/business/hiltzik/la-fi-mh-10-million-insured-20140103,0,4855449.story#axzz2sNDwT7J9

So, statistically (all caveats apply):
Medicaid+CHIP = 74% of enrollment as of January 1st
Exchange = 30% of enrollment as of January 1st

However, penalties don’t kick in until after the end of March, and enrollment isn’t a particularly valid metric until we get the number of people who have paid an actual premium. So, until we see the number of paid enrollees for April 2014, it’s all guesswork.

mulp February 4, 2014 at 1:53 pm

No one knows what is happening because no one is able to collect data reliably because sampling has no baseline.

For example, we have years of CDC/SS/CMS/Census reports related to births, deaths, pregnancies, abortions, etc, which are collected by multiple methods from different sources on the same events. States report vital statistics to CDC. Hospitals and funeral directors report deaths to SS. The parents register infants with SS. The different sources create data that do not agree.

However, the mashing of data released recently allowed Guttmacher to release its statistics on pregnancy, births, abortions, miscarriages for 2011 after they applied corrections validated by decades of historical data to correct for holes in the data collection and reporting.

How can anyone know what is going on now. The healthcare.gov website only transfers data to insurers who then issue policies and bills based on subsidy qualification. If everything works perfectly to that point, only the insurers know if anyone is paying the premiums on-time, so only private insurers know who is insured or not.

Only at the end of the year when insurers provide the final rollup of individual policy coverage to the IRS will it be know who was covered by private individual insurance. Only when the employers send in W-2s with the health benefit data for each individual will we know that data.

It is only now that we have real data on employer health benefit costs because it is only recently that this data had to be reported to the IRS. Anyone making comments about the cost of employer health benefits was merely making Sophisticated Wild Ass Guesses.

Right now, we are getting lots of unSWAG because no baselines exist for sampling, and no detailed reporting covers the entire population.

JWatts February 4, 2014 at 3:57 pm

“No one knows what is happening because no one is able to collect data reliably because sampling has no baseline.”

The DHS has refused to release the raw data it does have.

dsgntd_plyr February 4, 2014 at 12:05 pm

“The agency said that most of the effect would come from Americans deciding not to seek work as a result of the ACA’s impact on the economy. ” This statement doesn’t really make much sense to me. Will the primary result be that people will decide not to work as many hours because of the law, or that employers will decide to work employees less hours due to the effects of the law?

The workers will drop out of the labor force. Other commentators have pointed to people taking early retirement because with $0 in income you’d obviously qualify for Medicaid before rolling over to Medicare (or Medicaid AND Medicare for dual-eligibles).

Also, I wouldn’t be surprised if a big chunk of the 2M will be women moving from full- to part-time, or dropping out of the labor force entirely to take acre of kids. If you only make $20K/year with no benefits, and your husband, er, partner, makes $35K/year why not donk off some income to get more welfare AND save on childcare?

dsgntd_plyr February 4, 2014 at 12:06 pm

*care

Anon February 4, 2014 at 11:16 am

At this point I say “good.” The more jobs the world loses the faster people can seriously discuss “work” in a post-work, totalitarian capitalism, Average-is-Over, Second Machine Age world. The worst thing we can do is cling to industrial era norms and structures (e.g. widgets, jobs, GDP, unemployment) when it is blindingly obvious that technology is destroying jobs all around the globe (LFPR). The world can flourish with a labor force participation rate of 25% or less – let’s get there and share in the bounty. It’s time to start thinking outside the box.

Rahul February 4, 2014 at 11:28 am

How do the 75% share in the bounty? Million dollar question.

Anon February 4, 2014 at 11:41 am

Agreed – it is the million dollar question. But what we have going on right now isn’t sustainable. 50 million people on food stamps. A collapsing ratio of workers to retirees and disabled. 40%+ of Americans have subprime credit. Cities that represent war zones (Flint, Detroit, Camden, Trenton) where you can buy houses and abandoned factories for literally one dollar. College (and even law school) graduates working in retail and restaurants.

I’m a technological optimist. I believe the Silicon Valley crowd can do anything. I have no doubt they will drive down the costs of most physical goods and services. Our standard of living is high thanks to technology. But I also have no doubt that most people – including myself – will have very little utility to the workforce in 10 years or so. And even if you stay ahead of the wave and propser – becase I am doing well – is it even enjoyable when you have so many wastelands and beantopias sprouting up all over the country?

Winter is coming….

Rahul February 4, 2014 at 12:06 pm

I don’t agree with “the Silicon Valley crowd will drive down the costs of most physical goods and services”

Physical goods rarely obey Moore’s law or anything close. I doubt the price of a loaf of bread or a haircut has been driven down much, or at least nothing close to, say, a computer or cellphone.

Anon February 4, 2014 at 12:39 pm

You can use TaskRabbit and Fiver to get low price services – my friend’s housecleaner cuts hair – another friend got a book cover designed for $5. The services are still provided by humans but the platforms and marketplaces are driving the wages down. The sharing economy (AirBnB) is driving down the cost of travel. I’m a big believer that wearable tech and cheap medical diagnostic devices will drive down healthcare costs – Wired profiled a device that collects and analyses body fluids. You can provide your own samples at home and transmit the data to the doctor.

Food and cars will still be linked to energy and commodity prices but we now have access to virtually unlimited media for $65 per month (Internet access + Netflix + Pandora).

The elephant in the room is that the biggest monthly costs for most people are independent of technology – housing, taxes, insurance, transportation, utilities and food. Which is why the move to a part-time, service economy can’t work. Those jobs can’t cover the biggest monthly expenses.

Rahul February 4, 2014 at 1:22 pm

@Anon

The way I see it, Silicon Valley’s role will be to produce virtual “things” so that we don’t miss the physical things & services we may otherwise have missed not having. Netflix, Facebook, YouTube, Pandora & the whole porn industry fit this mandate.

mulp February 4, 2014 at 1:29 pm

Rahul, Silicon Valley is surely going to create the transporter and once that, the ability to create anything atom by atom will be trivial.

No need for farmers. No need for factories. No need for railroads. No need for coal and steel mines.

No need for cars, but if you want a car, well just design it and build it atom by atom using zero point energy.

We live in interesting times February 4, 2014 at 12:30 pm

Power and access oxen will be gored whether they want it or not. Business is consolidating, now it’s time for government programs. What and how would you do it?

Squarely Rooted February 4, 2014 at 12:37 pm

Actually, it’s the quadrillion-dollar question.

JWatts February 4, 2014 at 1:31 pm

“How do the 75% share in the bounty? Million dollar question.”

That would be the Trillion dollar question.

T. Shaw February 4, 2014 at 3:27 pm

“How do the 75% share in the bounty?”

They vote democrat.

That brings to my (alleged) mind my latest musings on a correlated liberal (12,000,000 more democrat voters/class warriors) “holy grail”: “immigration reform.”

A Modest Proposal for Preventing the Illegal Invaders From Being Burthens to Their Communities, and for Making Them Beneficial to the American Publick:

Executive Summary: Put a bounty on them.

Rahul: I think/hope that was “sarcasm.”

Nailed it!

chuck martel February 4, 2014 at 11:35 am

You’re right in that we shouldn’t resist the inevitable but instead adapt to it as well as possible. Unfortunately, we don’t really have a good picture of the inevitable as yet.

We live in interesting times February 4, 2014 at 12:06 pm

The best and brightest blond senator from Massachusetts wants to increase the social security payout. I was wondering how that would be possible since SS relies on jobs to fund it.

The business of America is business. The trick is to make ourselves more attractive, keep on a relatively even keel, while the world catches up. Silicon Valley can’t do it alone. Nor can they do everything. We are being strangled.

mulp February 4, 2014 at 1:22 pm

The best and brightest in the 80s proclaimed that by eliminating pensions and Social Security and providing tax free savings accounts invested by Wall Street, the average American worker would retire multi-millionaires.

Well, Social Security wasn’t eliminated, but pensions were, along with the unions who won and defended pensions. But there are a large number of ways to save and avoid taxes, so how wealthy are the average workers these days??

The data indicates the average net worth of workers today at 60 is less than the average net worth of similar workers in 1980, without placing a value on their pensions. Before the 80s, no one borrowed money for consumption, but only for investing in durable goods that would last longer than the debt. Becoming debt free was a high priority.

Reagan ushered in debt as a virtue and life goal. Bankers in the 60s were constantly asking “how will you become debt free?” Since Reagan, bankers ask “how can I put you deeper in debt?”

In the 60s, your home had to be debt free by 55 or you were a failure.

The Reagan solution to attract business was to let them cut pay and employee cost and then promote cash flowing in from outside the US to lend to workers to fund buying from businesses. Free lunch economics – debt to create wealth – the more debt the wealthy we are.

Before Reagan, you had to have income and productive assets to borrow.

After Reagan, it became cut income, borrow, and spend more to create wealth. And it was cut taxes, borrow and spend on unproductive useless stuff. In the 50s and 60s, it was hike taxes and spend creating jobs building unproductive useless things. Just like you had to work and get paid before going shopping or on vacation.

Sen Warren is a Midwest rural Republican from the 60s trapped in the 21st century. Republicans were always defending the true American individualist from the corporations, the farmers protected from the railroad robber barons, the farmers protected from the banksters, the farmers protected from the Chicago commodity speculators and meat packers and grain mills.

Conservatives argue that the past was best because the farmers were self sufficient, and what workers today need to be is self sufficient like the farmers were in 1900, except the government isn’t going to give you any land or protect you from the banksters and corporations.

JWatts February 4, 2014 at 1:46 pm

blah, blah, blah, Wall Street, blah, blah, Ronald Reagan, blah, blah, blah, Conservative.

mulp, get a clue. Obama is in The White House and has been for half a decade. Democrats have had plenty of time to fix any ills you think that Reagan caused over 25 years ago.

There are plenty of companies that are run by prominent Democrats or Left leaning individuals. There’s absolutely nothing keeping the management of Apple from having a pension plan and yet they don’t. Where in any of your rants do you hold anyone on the Left accountable for these issues.

You aren’t looking for a fix to an issue, you are looking for a convenient scapegoat.

john personna February 5, 2014 at 1:01 am

I agree that was heavy on the Reagan, but the rise of a consumer debt society seem spot on.

Anon February 4, 2014 at 2:58 pm

Re: “SS relies on jobs to fund it”

One of the few things we could consider in this era where there is a lack of correlation between employees and profits/revenues is to decouple the employer side of SS from employment. Each employer could pay a percentage of their revenues into the SS pool – that percentage is fixed for all firms. Low labor firms like Facebook and Google will be worse off while high labor firms like Exxon and WalMart will be better off. And perhaps this will incentivize the hiring of people vs. deployment of capital.

Nathan W February 5, 2014 at 2:41 am

I’m always suspicious of things painted as inevitable, because most of the time it represents either the effort of some group to portray their desired outcome as inevitable (so don’t waste your time fighting the inevitable outcome), or the “inevitability” of something is used to falsely influence people’s opinions on related matters.

However, if something is truly inevitable, then adaptation sounds like a capital idea.

CWill February 4, 2014 at 1:17 pm

You seem to be misreading this. It doesn’t say anything about losing jobs. It says we are going to lose workers.

David C February 4, 2014 at 3:02 pm

Exactly. Some workers will choose not to work and instead stay home to raise kids or something. Some of those workers would not have actually gotten jobs (they might have been unemployed). Other workers can then take the jobs that are now open. It seems like a win for both groups (those who choose not to take a lousy job and those who choose to do so). Ostensibly, the quality of workers will go down a bit, but the quality of childcare could go up.

Turkey Vulture February 4, 2014 at 6:06 pm

If there are fewer workers, there are fewer jobs.

David C February 5, 2014 at 10:39 am

No. Not all workers work. Most workers have jobs. Some workers are unemployed (about 6-7% now). So we can remove workers and still have the same number of jobs because whatever jobs are emptied are filled by the unemployed.

Furthermore, this report says that what is mostly happening is that people will choose to work fewer hours, and that in total that will be LIKE having 2 million fewer workers. Not that 2 million people will actually leave the workforce.

We live in interesting times February 4, 2014 at 11:17 am

Who are these people? Hopefully Obama voters.

It’s astounding the best and brightest couldn’t have foreseen this. There is a bright side, now their inner artist can be unleashed. People won’t have the money to buy said art, but….can’t make an omelet without breaking a few eggs. Forward!

Jay February 4, 2014 at 11:37 am

You mean those best and brightest that voted for it. The best and brightest on the other side of the aisle did point these things out (not in the best way but that is typical) and were called hyper partisan, fear mongers, do-nothing, and racist.

mulp February 4, 2014 at 12:53 pm

They were just trying to find common ground with you, by not totally solving the problem with government single payer that would be:
1. simpler because no one need qualify to get it
2. not need to change policy when changing jobs
3. employers do not need to figure out the pluses and minuses of health benefits
4. cheaper because there are no bill collectors and need to redistribute wealth by secret theft from those who have the money to pay to those who don’t have the money but get Reagan mandated free medical care

Unless you are going to call for euthanasia of the injured and sick without money and insurance and then sale of body parts to recover sunk costs of ambulances and such, you can’t argue for “free market health care”. And just remember that bankruptcy is Federal redistribution of wealth by a government technocrat from those with wealth to those without – anyone running up medical debt and then declaring bankruptcy, or dying, redistributes the wealth of the hospital to the patient; euthanasia and sale of body parts in bankruptcy liquidation of assets would be free market.

Jay February 4, 2014 at 2:43 pm

“They were just trying to find common ground with you”

This is a common backtrack from the left that is utterly ridiculous even on its face. The D’s in congress not only didn’t need any R’s to pass the bill, they didn’t receive any for all the “overtures” you claim they were making.

john personna February 5, 2014 at 1:07 am

I am pretty sure that is not game theory.

Dems did not in fact have unlimited commitment for arbitrary votes.

Jay February 5, 2014 at 11:02 am

I don’t understand this statement. At the time it was 100% clear no R would be tolerated voting for this thing. If Susan Collins even vows not to vote for it (which she did publicly) you know you’re not getting any other to turn and thus have no need to “water down” or make concessions to the invisible R to get their vote.

Vivian Darkbloom February 4, 2014 at 11:31 am

Is Casey Mulligan vindicated, or at least getting support from the CBO?

Marie February 4, 2014 at 12:00 pm

Nothing new, and nothing nefarious on the part of employees or employers.

Interestingly, J.K. Rowling has an essay out about when she was a divorced mom and on welfare (it’s the dole there, isn’t it?). One thing she points out is that she didn’t qualify for child care subsidies, so since she had no family to help and presumably dad didn’t, she found a job at a church that let her take her kid with her. But the church made sure they didn’t pay her one penny more than what qualified her for continuing benefits.

Everyone is scrambling to make calculations based on the new laws, and based on finding out more about the new laws every day. It’s not even necessarily about maximizing your mix of private compensation and public benefits. It’s about getting yourself to a stable place. There are going to be a lot of lines with ACA — the line where you have to be on Medicaid, the line where you can get X subsidy, the line where you get the next level of subsidy, the line where subsidies disappear and you have to pay back any your receive. People are going to want to land in a place where they don’t have to spend their entire day thinking about and worrying about this stuff.

Take the family right at the line between Medicaid and full subsidies, they apply and get on Medicaid. Then a month comes with a lot of overtime, they are dropped from Medicaid and have to apply for an ACA plan. Then what happens next month, when there’s no overtime? What happens in a “gap” if someone gets sick or hurt?

Folks on the other end of the spectrum are going to be in a similar place, do you take that one more contract job at the end of the year if it means trying to figure out how it affects your subsidy eligibility?

It’s the uncertainty. People are trying to find security, and most people would rather not spend this much time thinking about the federal policies on health care finance.

We live in interesting times February 4, 2014 at 12:13 pm

Wait until the married middle class mostly in blue states figures out they can save five figures if they’re near the phase-out by getting divorced.

mulp February 4, 2014 at 12:26 pm

Good argument for government single payer.

No matter your job status, you have health care, and employers aren’t making all sorts of inefficient decisions trying to avoid paying too much for employees they can replace in an instant, but not enough to the key employees who see health insurance as worth $50,000+ annually. If you drop the health benefit, then your key employee goes elsewhere, or maybe tries to work until he gets sick and then can’t work at all, so he is worthless to you, and then ends up on Medicaid or Medicare where he can’t work unless the employer provides the health benefit.

And paying the employee more so he can buy insurance might result in his paycheck being higher than his bosses boss gets paid because this is a system where health insurance is bought only by the sick.

Marie February 4, 2014 at 12:50 pm

That’s not an argument for single payer, that’s an argument for market capitalism.

But it very well might lead to single payer, because this is exhausting. The more byzantine you make the system, the more likely people will only hear “single” when you say single payer. In fact, that’s probably why we have moved from saying socialized medicine to single payer — not because of the stigma of the word socialized, but because we’ve had decades of people getting more and more tired of the complexities of the medical financing system, and the word “single” sounds heavenly.

We live in interesting times February 4, 2014 at 4:01 pm

No you have health insurance. You may or may not be getting health care, especially in a timely manner.

We live in interesting times February 4, 2014 at 12:35 pm

Everyone is scrambling, but the law keeps changing or delayed.

Marie February 4, 2014 at 12:50 pm

Yup. It’s a moving target.

CWill February 4, 2014 at 12:03 pm

Isn’t this a good thing? 2 million people that are only in the work force to get health care (they don’t need their wages) will now drop out of the workforce. The jobs won’t disappear, so other people looking for those jobs (the unemployed or underemployed) will now be able to get those jobs. This means unemployment goes down, more people who need jobs will be able to get them, and people who don’t want to work but need health care get what they want.

Maybe I’m missing something here, but forcing people to work just to get health care is extremely stupid and inefficient, while 2 million dropping out of the labor force because they are escaping this stupid system seems great.

Obviously those suffering from ODS (Obama Derangement Sydrome) (the liberal equivalent of this went extinct around 2011) will spin it and convince themselves this is horrible, but this seems like a good thing – right?

Please explain what I’m missing.

dsgntd_plyr February 4, 2014 at 12:14 pm

Obviously those suffering from ODS (Obama Derangement Sydrome) (the liberal equivalent of this went extinct around 2011) will spin it and convince themselves this is horrible, but this seems like a good thing – right? Please explain what I’m missing.
It’s ironic you mentioned “Obama Derangement Syndrome.”

Obamacare opponents predicted lower labor force participation before the bill became law. Tyler’s friends accused these people of opposing the ACA based not on reason, but on ODS. Now that ACA is “The Law of The Land,” and the re-election was successful we’re learning the critics were right.

Maybe I’m missing something here, but forcing people to work just to get health care is extremely stupid and inefficient, while 2 million dropping out of the labor force because they are escaping this stupid system seems great.
I agree that these particular 2M workers dropping out of the labor force may be a good thing. If more women stay home with their kids I have a hard time opposing that, but that has a cost (Medicaid expansion and subsides). Obamacare could’ve been written better if criticisms were taken seriously, rather than used to justify a belief that all non-progressives are secret racists.

Cwill February 4, 2014 at 1:11 pm

I don’t get why it’s ironic – please explain. My understanding is that those arguments that Tyler had, and in fact most of the arguments about the ACA and the labor market revolved around the extent to which the ACA would force employers to cut jobs and hire part timers instead of full timers. This is NOT what this study is describing. This is describing a different type of labor market fluctuation. This is workers voluntarily leaving the labor market – not employees eliminating jobs.

I think anyone with half a brain would conclude that the ACA could have been planned better – even though conservative Dems and Republicans spent about a year writing and revising it. The ACA is a product of a political process – reason and rationality don’t dictate law – politics do. This isn’t the question I’m interested in though – You didn’t really address my question.

You seem to be saying this is bad for the ACA because it will increase subsidies and medicare spending. OK. That’s not really the point though, and this research doesn’t attempt to explain how this development will affect government spending – you can only speculate.

I’m far more interested in the broader economic impact of this law. Why is this bad for the economy in general? These people aren’t dropping out of the workforce because they can’t find jobs – they are dropping out because they now have access to health care – I’ve actually known many, many people from my times working in retail who had jobs ONLY because they needed health care – they didn’t need the money, they just had a wife, or son or someone who was dying and needed the insurance, now they can get that insurance and devote themselves to some other activity like starting a business or writing a novel, or retiring. I don’t see how this is bad.

Finch February 4, 2014 at 1:41 pm

If someone needs something, it’s better that he work to get it than that he just take it from other people who are powerless to resist. The people who will drop out of the labor force are people who are capable of paying their own way, and now choose not to.

That’s bad. It hurts everybody else who has to pay for this indulgence.

Turkey Vulture February 4, 2014 at 1:41 pm

Some people are in the labor force only because they need food and shelter.

The economic impact of fewer total people working is that less total stuff is produced. You say “These people aren’t dropping out of the workforce because they can’t find jobs – they are dropping out because they now have access to health care” – as if it’s better for people to be dropping out of the labor force who could otherwise find jobs than for people to drop out of the labor force because they can’t find jobs. That is backward in terms of economic impact. If two million people drop out of the labor force – i.e. give up looking for work – but wouldn’t have found work anyway, then this is inconsequential to how much the economy produces. If 2 million people who otherwise would have worked drop out of the labor force, it’s very consequential.

CWill February 4, 2014 at 4:11 pm

But with unemployment high, we could stand to have people drop out of the workforce who don’t need the income – this actually WON’T mean fewer things produced. I don’t think you understand or have read the entire report – 2 million workers will drop out of the workforce because they now will get healthcare elsewhere than from their employer. These are people that already have jobs (mostly) who will leave the workforce, ( a number of them likely just a few years earlier than they otherwise would have anyway due to retirement).

You say that this is consequential – it is indeed! But it is not negative to have people leaving the workforce when we have a much, much larger workforce than we do jobs. It may be bad if you are a CEO, because it may drive wages up, but from a macro-economic perspective, this is a good thing. We can always import more workers into the US if we need to in the highly unlikely event that we need more workers.

Turkey Vulture February 4, 2014 at 5:45 pm

You are assuming both that (1) the number of available jobs in the economy is fixed, and (2) that people currently working who would drop out of the labor force or reduce hours due to the ACA are the same as those who would take their place. Neither is accurate. As to the latter in particular, it seems reasonable to suppose that people who currently have jobs will be, on average, more productive than the currently-unemployed who would take over those jobs – otherwise, the currently-unemployed would have those jobs and the currently-employed would be unemployed. Even just this changeover would mean less total value produced by our economy, reducing the size of the economic pie.

Turkey Vulture February 4, 2014 at 6:12 pm

Also, you’re completely ignoring that the CBO originally said 800k jobs would be lost, just including the effect on employers – i.e., in your terminology, real jobs lost, not workers lost. The additional jobs now included in the 2.1 million total is including the effects on the incentive for people to work.

Turkey Vulture February 4, 2014 at 6:27 pm

I’m not seeing that prior 800,000 number in the CBO paper though, just in the WaPo article.

CWill February 4, 2014 at 1:39 pm
yenwoda February 4, 2014 at 3:30 pm

“but that has a cost (Medicaid expansion and subsides)”

Right, but it had a cost before, as well – the employer based insurance subsidies that were keeping them in the full-time workforce. Additionally, most of the people who will drop out of that category aren’t paying much in taxes due to their income levels, so the cost there is not terribly high either.

mulp February 4, 2014 at 12:13 pm

Just more evidence the US must go to government single payer.

Employers do not want to be in the insurance business, and only reluctantly provide insurance to compete for workers who would otherwise emigrate to Europe and Asia for better employment packages.

A key part of Obamacare is building on the half century of depending on employers providing health care to employees to prevent overwhelming public demand for public health care which would mean single payer. The employer benefit law was changed repeatedly to require workers of all status get the same benefit is the top management and the most critical corporate technocrats (scientists, lawyers, engineers, etc).

The loophole the corporations fixed on in the 80s was outsourcing work to contractors that provided no one with benefits. And those outsourcing companies became the means of racing to the bottom by employing people illegally in many dimensions. Workers were not paid as required by law – no pay for overtime, no pay while waiting on the job, no pay for part of hours actually worked – with no recourse because the companies had no assets and vanished when legal action was taken, especially when the purpose was hiring illegal workers.

The result is a larger and larger portion of the employers are racing to the bottom of trying to profit from underpaying workers while selling primarily to the well paid employers who have not started the race to the bottom. The corporations racing to the bottom the fastest can’t sell to their employees because their employees don’t make enough to subsist without welfare.

And the point of the corporations racing to the bottom is they want the government provide welfare to their employees to boost their profits by making their employees marginal consumers of their goods. If the government provides subsidized health care, food assistance, housing assistance, etc, then the minimum wage part-time contract cleaners can shop at the retailers they clean and buy food using food stamps, fill prescriptions using Medicaid, and use their minimum wage pay to buy clothing and school supplies for their kids.

Think Tar-jay lobbying for French style welfare state benefits for Target employees.

It would be more economically efficient if we simply outsourced all health care policy, public and private, to the French government.

prior_approval.com February 4, 2014 at 12:36 pm

‘…and only reluctantly provide insurance to compete for workers who would otherwise emigrate to Europe and Asia for better employment packages’

Trust me – neither the Commonwealth of Virginia nor the center I worked for at GMU had any interest in retaining those who felt that several weeks vacation or health care not tied to employment or the right of an employer to decide how an employee could live outside of their workplace was a minimum requirement for an employer to meet.

Strangely enough, this is not a problem for German employers. As Walmart discovered in Germany, to its estimated billion dollar loss – and public ridicule, when it attempted to defend its right to forbid romatic relationships between its employees. Pretty much the only thing that people in this region, where Walmart was headquartered after buying out a chain called Wertkauf, remember about Walmart is that ridiculous attempt to defend the corporate right to tell its employees how to live their life.

One can discover just how much Germany has suffered by such attitudes, using the latest economic statistics.

We live in interesting times February 4, 2014 at 12:16 pm

Or Obamacare was designed to get single payer which is not a panacea. Some of us don’t really care that Europe has single payer and would make us more “advanced” in their eyes. They’re going broke with it.

We live in interesting times February 4, 2014 at 12:19 pm

Think Obamacare putting in French work-insurance rules.

steve February 4, 2014 at 12:27 pm

Not really. Their health care costs are much lower than ours. It is their other social spending causing them problems.

Steve

We live in interesting times February 4, 2014 at 3:51 pm

About France.com has a brief overview of the system. So to see a GP, they pay about $67 (50 euros) up front and once the form is reviewed depending on the criteria, the most they will pay OOP is about $12 (9 euros)? Go outside of network with no GP referral and pay the full freight of that visit?

The last 2 paragraphs are amusing.

Jay February 4, 2014 at 12:55 pm

Correct me if I’m wrong but despite what Mulp says, very few countries, in Europe or elsewhere, have true single payer. Canada andTaiwan I believe are the only ones. What Europe is dominated with is universal coverage but a mix of private and public funding.

Turkey Vulture February 4, 2014 at 1:34 pm

Wikipedia says 30% of Canadian healthcare expenditures are from private sources, whether insurance or out-of-pocket.

http://en.wikipedia.org/wiki/Health_care_in_Canada#Restrictions_on_privately_funded_health_care

Turkey Vulture February 4, 2014 at 1:47 pm

In the U.S., about 45% of health spending is public, and 55% private, going by this:

“In 2012, households accounted for the largest share of spending (28 percent), followed by the federal government (26 percent), private businesses (21 percent), and state and local governments (18 percent)” (it then says that 7 percent are other private expenditures).

http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/highlights.pdf

JWatts February 4, 2014 at 1:59 pm

I thought the standard list was Australia, Canada & the UK. I wasn’t aware of Taiwan, but Wiki says you are right. To your point, mulp is wrong. The only European country out of roughly 50 with single payer is the UK.

prior_approval February 4, 2014 at 2:07 pm

Yep – and all the other Europeans tend to look down at the NHS, even though it has recently improved.

There are a multitude of essentially universal health care systems in Europe – none of them are ‘socialist’ in the same way that the system in the UK is. Unsurprisingly, basically none of those systems use English as their primary language.

The funny thing is, the German essentially universal health care system, which is more than a century old, is still basically a private one – no doctors work for the state, for example, apart from those working in public health positions similar to their American counterparts

Jay February 4, 2014 at 2:46 pm

Australia and the UK allows for private funding. I wasn’t aware Canada. The common criticism of the system was that you could pay out of pocket to a vet to see your dog’s hip by next week but you couldn’t pay to see a GP yourself as it was illegal.

We live in interesting times February 4, 2014 at 3:54 pm

The animal got an MRI faster. There are articles from Canadian papers backing that up.

Jay February 5, 2014 at 11:05 am

After looking through Wiki, Canada only allows for private funding for procedures not covered by the single payer system. For those that are covered, it is illegal to pay out of pocket, hense the designation as single-payer along with Taiwan.

dsgntd_plyr February 4, 2014 at 12:22 pm

The loophole the corporations fixed on in the 80s was outsourcing work to contractors that provided no one with benefits.

I don’t think you know what “loophole,” means.

The corporations racing to the bottom the fastest can’t sell to their employees because their employees don’t make enough to subsist without welfare.

Selling to your employees is a sign the market doesn’t want your product. Because if it did, wouldn’t people outside the company buy your good/service? Think about it mulp before you reply.

derek February 4, 2014 at 3:25 pm

I’ll agree that mulp is not making the strongest points here, but you are taking him to task for referencing the high amount of Wal-Mart workers on welfare. Since Wal-Mart sells staples like groceries and clothing at a low cost, if one of their employees cannot shop there, it is more a reflection of very low wages than a sudden lack of demand for food.

Donald Pretari February 4, 2014 at 12:56 pm

I’ve just read through the Document once, which isn’t enough, but, as per usual, I find the CBO Analysis sensible. I want to highlight Three Points:

1. “The projections that make up CBO’s baseline are not intended to be a forecast of budgetary outcomes. Rather, they are meant to provide a neutral benchmark that policymakers can use to assess the potential effects of policy decisions.”

These are not Predictions of the Future, but Aids for Enacting Legislation. They aren’t much use if Legislators don’t use them Pragmatically.

2.” In CBO’s projections, the growth of potential GDP over the next 10 years is much slower than the average since 1950. That difference stems primarily ( NB- Don ) from demographic trends that have significantly reduced the growth of the labor force. In addition, changes in people’s economic incentives caused by federal tax and spending policies set in current law are expected to keep hours worked and potential output during the next 10 years lower than they would be otherwise.”

I’m interested in how this conclusion will be interpreted. Generally, one would expect people who use the second part of the Analysis for Evidence will accept the value of the Evidence of the First Part of the Analysis, meaning that focus should be placed on the Growth of the Labor Force, since it is “Primary” to the problem.

3. “With such low inflation and considerable slack in the labor market, CBO anticipates that the Federal Reserve will keep short-term interest rates (such as those on 3-month Treasury bills) at their current low levels until mid-2015 but that long-term interest rates (such as those on 10-year Treasury notes) will gradually rise as the economy strengthens .”

In advocating QE plus a Reinforcing Stimulus, the point of Raising Expectations of Long Term Inflation Rates is to Incentivize Current Investment through Higher Yields. As the Economy Strengthens, these Yields will eventually coincide with 10 Yr Treasury Yields, more or less. Hey. I’ve said the future is unpredictable.

carlospln February 4, 2014 at 3:59 pm
mwbugg February 4, 2014 at 4:50 pm

Best summary on the CBO report I’ve seen is from Josh Barro:

http://www.businessinsider.com/cbo-report-obamacare-discouraging-work-2014-2

Donald Pretari February 5, 2014 at 1:16 am

That was a very good post.

Turkey Vulture February 4, 2014 at 6:00 pm

So I’m already seeing the spin on this – people are choosing to provide fewer hours of labor, so how dare you imply jobs were “lost”. Oh, but why are they choosing to provide fewer hours of labor? Because of the relevant incentives the ACA creates: subsidies for some, taxes for others, inducing less labor supply on the margins at both ends.

But this is good! We need fewer people in the labor force, because there’s unemployment! This allows people the freedom to do what they want, because they won’t have to work just to get health insurance!

Well shit, I hate working. If you could just give me enough money to live decently – including health insurance – without working, then I wouldn’t work. It’d be a paradise where none of us ever has to work again if we don’t want to.

David C February 5, 2014 at 10:45 am

Again, you don’t understand what CBO is saying. They’re saying that mostly people will choose to work fewer hours. Nowhere do they say that the number of jobs available or filled will go down. Nor do they say that the number of hours worked will go down. Just the supply of available hours at current prices will go down. So, employers will have to hire different people to fill those hours or pay people more to work them. This is hardly news. If the poor are better off – one of the goals of the Act – then naturally they will be more picky about how much they will be paid to work and how much overtime they will work.

Turkey Vulture February 4, 2014 at 6:18 pm

“The ACA includes a range of provisions that will take full
effect over the next several years and that will influence
the supply of and demand for labor through various
channels. For example, some provisions will raise effective
tax rates on earnings from labor and thus will reduce the
amount of labor that some workers choose to supply. In
particular, the health insurance subsidies that the act pro-
vides to some people will be phased out as their income
rises—creating an implicit tax on additional earnings—
whereas for other people, the act imposes higher taxes on
labor income directly. The ACA also will exert conflicting
pressures on the quantity of labor that employers
demand, primarily during the next few years.”

http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014.pdf at p. 123

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