Obamacare will lead to a drop of 2 million in the number of full-time equivalent workers in 2017 and 2.5 million in 2024, according to the Congressional Budget Office, as workers respond to the incentives in the law that discourage work and make it easier to gain access to health insurance without a job.
That’s a major increase in the impact of the law since the last time the CBO, Congress’ nonpartisan budget scorekeeper, looked at the issue in 2010. The CBO found that “the effects of the Affordable Care Act would be a good deal larger” than previously thought, said director Douglas Elmendorf.
Obamacare will reduce the total number of hours worked by 1.5 to 2 percent over the years 2017 to 2024, according to the CBO, “almost entirely” because workers will choose to work less. Because those workers will predominantly be low-wage workers, the loss of labor consumption resulting from the law will be proportionately smaller — roughly 1 percent over the same time frame.
The decline in employment is a consequence of expanding health care coverage through exchange subsidies and Medicaid, Elmendorf said. Both exchange subsidies and Medicaid benefits can create high implicit marginal tax rates for their recipients, who could lose subsidies or coverage by earning more. Those marginal tax rates can depress work.
Elmendorf also noted that Obamacare’s penalties for employers who do not offer employees insurance coverage will reduce hours worked, as will the tax increases included as part of the law.
The CBO also downgraded its projections of the number of Americans who will gain health insurance coverage through Obamacare in its updated budget projections Tuesday morning to reflect the rocky rollout of the Obamacare exchanges.
The budget office now expects only 6 million people to enroll in the exchanges in 2014, down from 7 million anticipated previously. It also decreased its projections of people entering Medicaid by one million. By 2024, it estimates that enrollment on the health exchanges will grow to 24 million and the number of Medicaid and Children’s Health Insurance Program enrollees to increase from 8 million to 13 million.
As a result of lower-than-expected exchange and Medicaid enrollment, the CBO reduced its estimate of the costs of the coverage provisions of Obamacare for the period 2014-2024 by $9 billion. The gross costs of Obamacare’s coverage expansions are projected to be just over $2 trillion for the current budget window, from 2014 to 2024.