CBO Confirms Health Care Law Destroys Jobs

800,000 jobs!

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• Campbell

[dpas2009]

People currently lose

eligibility for Medicaid if their income rises above a certain level; for working parents, the median income

threshold for eligibility among states was 64 percent

of the FPL in 2009. The health care legislation will

allow parents to work and still qualify for Medicaid

until their income exceeds 138 percent of the FPL.

[dpas2009]

As a result, some older workers will choose to retire

earlier than they otherwise would.

In contrast, another feature of the Medicaid expan-sion removes an existing disincentive to work for

many low-income individuals.

[dpas2009]

Other provisions in the legislation are also likely to

diminish people’s incentives to work. Changes to the

insurance market, including provisions that prohibit

insurers from denying coverage to people because of

preexisting conditions and that restrict how much

prices can vary with an individual’s age or health

status, will increase the appeal of health insurance

plans offered outside the workplace for older workers.

[dpas2009]

But because most workers

who are offered insurance through their jobs will be

ineligible for the exchanges’ subsidies and because

most people will have income that is too high to be

eligible for Medicaid, those effects on financial

resources and marginal tax rates will apply only to a

small segment of the population.

[dpas2009]

Those addi-tional 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.

[dpas2009]

Those subsidies decline in value as

income rises and can, under some circumstances,

drop sharply to zero when income exceeds

400 percent of the FPL. The expansion of Medicaid and the availability of

subsidies through the exchanges will effectively

increase beneficiaries’ financial resources.

[dpas2009]

People who purchase insurance through the new

exchanges will generally be eligible for tax credits to help them pay their health insurance premiums

if their income is between 138 percent and

400 percent of the FPL and they are not offered

coverage through an employer. (They may also

be eligible for reductions in their cost-sharing

requirements.)

[dpas2009]

In particular:

The legislation extends Medicaid eligibility to

most nonelderly residents whose income is below

138 percent of the federal poverty level (FPL)—

including childless adults who are currently ineli-gible for Medicaid in most states. (The FPL in

2010 is $10,830 for a single person and $22,050

for a family of four.)

[dpas2009]

Moreover, many people will be unaf-fected by those provisions and will face the same

incentives regarding work as they do under current

law. The net reduction in the supply of labor is largely

attributable to the substantial expansion of Medicaid

and the provision of subsidies that will reduce the

cost of insurance obtained through the newly created

exchanges, beginning in 2014.

[dpas2009]

That net effect reflects changes in incentives

in the labor market that operate in both directions:

Some provisions of the legislation will discourage

people from working more hours or entering the

workforce, and other provisions will encourage them

to work more.