Funding the Affordable Care Act

Or not. With 2.5 million Americans leaving the workforce, that's 2.5 million less paying into it. Even the CBO (Congressional Budget Office) can do math:

White House: It's A Good Thing That Obamacare Will Drive 2.5 Million Americans Out Of The Workforce

[...] By 2024, says the CBO, Obamacare will reduce the size of the U.S. labor force by 2.5 million full-time-equivalent workers. That’s roughly triple what the CBO had estimated three years ago. Such a sizeable decline in the labor force will have substantial detrimental effects on the U.S. economic and fiscal picture.

[...]

In its annual, 182-page Budget and Economic Outlook, the CBO undertook an overhaul of the way it analyzes the effect of Obamacare on the job market. The new, larger estimate of the law’s negative impact on the labor force derives from three factors: (1) Obamacare’s employer mandate, which will discourage hiring and reduce wages offered by employers; (2) Obamacare’s $1 trillion in tax increases, which will discourage work and depress economic growth; and (3) the law’s $2 trillion in subsidies for low-income individuals, which will discourage many from remaining in the labor force.

Let’s focus on that last point, because it’s the one that has been the least-discussed in the media. In the past twelve months, a spate of research from academic economists has concluded that the health law, by offering economic benefits to low-income individuals, will disincentivize some of these individuals from continuing to work. Casey Mulligan of the University of Chicago has been particularly persuasive on this front, publishing two papers with the National Bureau of Economic Research.

Several economists, like Harvard’s Kate Baicker, MIT’s Amy Finkelstein, Texas A&M’s Laura Dague, and Northwestern’s Craig Garthwaite have found that expanding Medicaid is associated with rising unemployment. “Taking that research into account, CBO estimates that expanded Medicaid eligibility under the ACA will, on balance, reduce incentives to work.”

More significantly, as Casey Mulligan has warned, the new subsidized insurance exchanges will allow low-income workers to work less while maintaining the same effective income: what economists call the income effect. In addition, because the subsidies decline on a sliding scale as you make more money, that sliding scale means that as workers work more, they make less per hour worked: what economists call the substitution effect.

When Mitt Romney signed his health-reform legislation in Massachusetts in 2006, economists didn’t discern a substantial impact on the labor market. That led many Obamacare cheerleaders to dismiss concerns that the law would depress the workforce. But Mulligan observes that the Massachusetts law did not have a meaningful impact on income tax rates, unlike Obamacare. The ACA “increases national rates about 12 times as much as the Massachusetts law increased rates,” notes Mulligan; “among other things, [Massachusetts’] employer penalty is an order of magnitude less.”

CBO staff, to its credit, read the sheaf of new research on this topic, and revised its estimates accordingly. Hence all the hubbub about the new report. But wait—there’s more!

Carney: Americans should stop working ‘to pursue their dreams’

After the CBO review came out, White House Press Secretary Jay Carney published a statement in which he declared, remarkably, that it’s a good thing that millions of Americans may drop out of the work force:

Over the longer run, CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families. At the beginning of this year, we noted that as part of this new day in health care, Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams.

Bored with your job? No worries—now you can quit, thanks to the generosity of other taxpayers. Want to retire early? No worries—now you can, thanks to the generosity of other taxpayers, and also thanks to the higher premiums that young people will be forced to pay on your behalf. The White House’s apparently sincere belief—echoed by progressive pundits at MSNBC, The New Republic, and the L.A. Times—is that it’s a good thing for fewer Americans to be economically self-sufficient.

If you’re one of the chumps out there who still toils away at a challenging job, and still pays taxes so that others can “pursue their dreams,” you have a right to resent the White House’s argument. And the “dream-pursuers” themselves should become aware of all the research suggesting that earned success, through hard work, is the most reliable path to true happiness.

Participation in the labor force was already declining, thanks to the poor economy and the retirement of the Baby Boomers. Obamacare, it appears, will accelerate that process, forcing fewer and fewer taxpayers to support a greater number of government beneficiaries.

No universal-coverage plan is immune from this problem

I should issue two caveats before I go on: any health-reform plan that seeks to offer coverage to the uninsured will have this type of effect on the labor market. As Josh Barro notes, the new Republican plan to replace Obamacare offered by Senators Tom Coburn (Okla.), Richard Burr (N.C.), and Orrin Hatch (Utah) also has a means-tested subsidy to help the poor buy health insurance.

In addition, it is genuinely a good thing for us to move to a system where people control their own health dollars and their own health coverage, and aren’t stuck at a job because they’re afraid of losing the coverage they have. But giving people the opportunity to switch jobs is quite a different goal from encouraging them to drop out of the work force altogether.

The negative effect of Obamacare on the labor market is far worse than any Republican alternative would be, because the ACA dramatically expands Medicaid, and because the law heavily subsidizes health insurance for those nearing retirement. In addition, Obamacare depresses economic growth through a $1 trillion tax increase, and increases the cost of hiring new workers, because of its employer mandate requiring most businesses to offer health coverage to every worker.

The CBO report harbors more bad news

The new CBO report contained a lot of other interesting information. CBO projects that economic growth will be more sluggish than they had previously projected. From 2018 to 2023, nominal GDP growth will average 4.2 percent, compared to the CBO’s previous estimate of 4.4 percent. Over the same period, unemployment will average 5.6 percent, higher than the previous estimate of 5.4 percent.

Because of this slower economic growth, CBO projects that from 2014 to 2023, the federal government will receive $1.4 trillion less in tax revenue than it had projected last year. As a result, “CBO now estimates that the cumulative deficit for the 2014-2023 period…would be about $1.0 trillion greater than it projected in May [2013].” [...]

The biggest problem with the ACA, the way it is, is funding it. Parts of it were fine, and the Republican plan embraced those parts. But other parts are unsustainable. What is the point of passing legislation that is unsustainable?

Ideally, the president should have worked with Democrats and Republicans in Congress to combine aspects of both their plans, into something that would work. But that didn't happen. We got the Democrats plan shoved down our throats. Now what's going to happen, as this disaster continues to unfold, and it starts to fail?

It looks like we shall see. We will all have front row seats, whether we want them or not.

The full article at Forbes.com has many embedded links, graphs, and videos.

     

The Truth: You can't keep the plan you had

Sticker shock often follows cancellation notice for those with individual health care policies

MIAMI — Dean Griffin liked the health insurance he purchased for himself and his wife three years ago and thought he’d be able to keep the plan even after the federal Affordable Care Act took effect.

But the 64-year-old recently received a letter notifying him the plan was being canceled because it didn’t cover certain benefits required under the law.

The Griffins, who live near Philadelphia on the Delaware border, pay $770 monthly for their soon-to-be-terminated health care plan with a $2,500 deductible. The cheapest plan they found on their state insurance exchange was a so-called bronze plan charging a $1,275 monthly premium with deductibles totaling $12,700. It covers only providers in Pennsylvania, so the couple wouldn’t be able to see the doctors in Delaware whom they’ve used for more than a decade.

“We’re buying insurance that we will never use and can’t possibly ever benefit from. We’re basically passing on a benefit to other people who are not otherwise able to buy basic insurance,” said Griffin, who is retired from running an information technology company.

The Griffins are among millions of people nationwide who buy individual insurance policies and are receiving notices that those policies are being discontinued because they don’t meet the higher benefit requirements of the new law.

They can buy different policies directly from insurers for 2014 or sign up for plans on state insurance exchanges. While lower-income people could see lower costs because of government subsidies, many in the middle class may get rude awakenings when they access the websites and realize they’ll have to pay significantly more.

Those not eligible for subsidies generally receive more comprehensive coverage than they had under their soon-to-be-canceled policies, but they’ll have to pay a lot more.

Because of the higher cost, the Griffins are considering paying the federal penalty — about $100 or 1 percent of income next year — rather than buying health insurance. They say they are healthy and don’t typically run up large health care costs. Dean Griffin said that will be cheaper because it’s unlikely they will get past the nearly $13,000 deductible for the coverage to kick in.

Individual health insurance policies are being canceled because the Affordable Care Act requires plans to cover certain benefits, such as maternity care, hospital visits and mental illness. The law also caps annual out-of-pocket costs consumers will pay each year.

In the past, consumers could get relatively inexpensive, bare-bones coverage, but those plans will no longer be available. Many consumers are frustrated by what they call forced upgrades as they’re pushed into plans with coverage options they don’t necessarily want. [...]

The article goes on to give more examples, from people in lower income brackets than the Griffins, who are also loosing the plans they had, and will now have to pay more.

I've been given a 90 day notice that my insurance plan is being canceled.

Health care reform, done properly, should offer us more choices of things we want and need, not choices made by bureaucrats that are shoved down our throats. I want the health care I had, not somebody elses decisions.

The problem with the ACA right from the beginning was that there was no significant bipartisan input. Reform was needed, but it was too one-sided, and this is the result.

Two interesting comments under the article:

UCanKeepthechange
11/3/2013 10:11 AM PST
The WH is attempting to blame cancelled policies on insurance companies. However, the truth is that it is due to the ACA.

The so called grandfathering in of existing policies was dishonest. If the cost to the consumer of a policy went up a single dollar ($1) since the law passed in 2010, it was DISQUALIFIED from the grandfather clause.

When the law passed in 2010, the administration already knew the following:

80%+ of individual market policies would not conform to ACA and would be eliminated by law
65% of policies for small businesses and their employees would not conform to ACA and would be eliminated by law
45% of policies for large businesses and their employees would not conform to ACA and would be eliminated by law.

So, when you hear the administration's talking heads blaming insurance, understand that it is simply another lie. This one is all on Obamacare.

Salverda
11/2/2013 7:10 PM PDT
Don't be deceived, by the latest straw-man argument, into thinking that insurance companies are some how sabotaging Obamacare. Think for a minute: Who wants the "individual mandate" forcing every American to become a costumer of the insurance industry? And: Why would insurance companies want to infuriate half of their current customers by canceling their existing policies, without having the law on their side? The insurance companies know that they won't loose their clients, they will just be "transferred" or "channeled" into more expensive plans that call for higher premiums and larger deductibles. The complicit insurance companies are in cahoots with Obama on Obamacare; Why aren't they speaking up right now while Obama falsely accuses them of canceling policies, and charges them with selling "inadequate" and "unsatisfactory" "bad-apple insurance" products to their costumers? They keep quiet and just take it, because they are colluding with Obama, open your eyes! Sure there were coverages (no coverage caps, pre-existing conditions, 26 year old "child" dependents) that the insurance industry was reluctant to offer, at first. Their costumers would not have stood for the increased costs of these extravagant, and even unnecessary, services. However, under Obamacare they have found a way to get us to pony up, and now, they view these services in a different light. Their clients will be forced by law, to pay for these things, and they have been "allowed" to charge us for them. To the insurance industry, it is as if all of their costumers have been upgraded into their highest cost Cadillac plans. And they are lapping it up, taking full advantage of the situation.