How many jobs does ObamaCare kill?

Casey B. Mulligan, University of Chicago economist, recently answered this provocative question in an Op-Ed for The Wall Street Journal. Mulligan put this issue in perspective when he said:

“Democrats loudly complain that people will lose health insurance if the Affordable Care Act is repealed. They never mention those who lose jobs because the ACA remains.”

 

The key to understanding this is a provision of ObamaCare known as The Employer Mandate. This penalizes employers that fail to provide “adequate” insurance for full time workers – if the company has more than 50. According to Mulligan, hiring the 50^th full time worker costs an additional $70,000 a year on top of the normal salary and benefits.

To avoid this penalty, many employers avoid hiring more than 49 full time workers and hire more part-time workers (less than 30 hours/week). Supporters of ObamaCare have long dismissed this argument as insignificant. Mulligan has done the research to address this question definitively.

Mulligan partnered with The Mercatus Center at George Mason University to commission Hanover Research to survey small businesses nationwide regarding their hiring and compensation practices. The result gave them a sample of 745 small businesses, representing every major industry and together employing almost 50,000 people.

Those employers who employed just fewer than 50 often said the ACA caused them to hire less and cut hours below the full-time threshold. The ACA penalty caused them to shrink payrolls and prevented them from growing.

As a result of their survey they concluded the ObamaCare penalties that inspired employers to keep fewer than 50 full time employees has cost roughly 250,000 jobs. This calculation does not count those jobs lost when businesses close.

Mulligan estimates this situation will get worse since the penalty grows and the effectiveness of enforcement is also expected to grow.

Did more employers offer healthcare insurance as a direct result of ObamaCare?

About one third of the businesses surveyed now offer coverage to their employees as a result of the law. But two-thirds of those now not offering coverage previously did offer it. Because of the perverse incentives built into the law, some managers said the exchanges are a new option and that offering coverage at work would render employees and their families ineligible for government subsidies.

In other words, ObamaCare continues to be one of the reasons our economy continues to exhibit sluggish growth. As Mulligan says, “Maybe it’s time for repeal.”

 

It’s hard to understand anyone when you don’t speak their language. In politics there is a language of its own that will leave you confused unless you understand what people, and the media, are saying. Here are some examples of language used in the healthcare debate that may have you confused:

When is a “cut” not a cut?

When critics, or even the media, are talking about the GOP Medicaid reform legislation that doesn’t “cut” spending. It merely slows the rate of growth of spending from a current twice inflation to a new growth rate of medical inflation (higher than overall inflation) until 2025. Thereafter it will continue to grow at the rate of overall inflation. In Washington, anytime Congress reduces the growth of spending it is referred to derisively, and inaccurately, as a “cut.”

When does voluntarily dropping your health insurance mean the government forced you to “lose” your coverage? When critics are talking about the CBO scoring of the GOP healthcare legislation that gives people a choice about buying insurance. The CBO believes that merely dropping the Individual Mandate that forces people to purchase insurance will result in 15 – 18 million Americans voluntarily choosing to drop their insurance that they don’t believe they need nor want to pay for. The CBO actually just predicts fewer people will have coverage, but critics mislabel this as “lost coverage.”

When does stimulating the economy to create more jobs for everyone mean a “tax cut for the rich?” When critics are talking about the GOP elimination of ObamaCare taxes on investment. ObamaCare raised taxes on everyone, but especially on higher income Americans with a 3.8% tax on investment income. Although the rich can afford this, economists agree this investment tax acts as a disincentive that harms the economy, costing America thousands of jobs; jobs mostly for low-income people. If the final bill retains this tax, as liberals and moderates demand, it may seem “fairer” because it taxes the rich more, but the real losers will be people looking for jobs.

When does reducing the growth of an out of control entitlement mean “throwing people off Medicaid?” When critics describe the changes the GOP wants to make to ensure Medicaid will be available for those who really need it in the years to come. ObamaCare changed the original intent of Medicaid to cover the poor, children, pregnant women, the elderly, and the disabled into an entitlement for able-bodied unemployed adults for the first time. The GOP Senate bill calls for states to decide for themselves if they want to continue to cover these adults who refuse to go back to work. States with innovative Medicaid programs with work incentives, like Indiana, have reduced their rolls of Medicaid as people go back to work and get employer-provided or subsidized private insurance. Expansion of Medicaid has actually resulted in fewer dollars to cover those who really need the help because of the expanded coverage of those who don’t.

When does asking people with expensive health conditions to pay a little more than healthy Americans for their health insurance mean “eliminating coverage of pre-existing conditions?” When critics misrepresent the GOP changes to ObamaCare. Pre-existing coverage will still be available to everyone but with new provisions to prevent “gaming the system” which raises premiums for everyone. Those who have chronic, expensive conditions rightly will pay a little more than the healthy but not the actual full cost (which is subsidized by high-risk pools). The bill calls for $138 Billion in funding for these high-risk pools. No one will be denied coverage due to pre-existing conditions as in the pre-ObamaCare era.

When does “millions of people will die” from loss of health insurance mean millions chose to drop insurance coverage they didn’t need and didn’t want? When critics describe the CBO projections for insurance coverage after the GOP healthcare bill is passed. This alarmist rhetoric is designed only to frighten the uninitiated. No one needs to die for lack of healthcare treatment – unless we adopt a single-payer system (which Democrats want!) that allows the government to decide who gets treatment and who doesn’t. (See Charlie Gard crisis in Great Britain.)

When is it considered “fair” to force young and healthy people to pay more than the actual cost of their health insurance premiums? When progressives passed ObamaCare. Though they usually promote “redistribution of income” from the wealthy to those with less income, ObamaCare actually did the opposite in some ways; forcing young and healthy people (who are usually poorer) to pay more so that older and sicker people (who are generally wealthier) could pay less. Now, as the GOP tries to correct this problem, critics argue they are being “cruel” to make older people pay more. If the young and healthy people aren’t given a good value for their insurance premium they will refuse to enroll (which they did!) forcing everyone to pay more and undermining the financial stability of the system. That’s one of the main reasons ObamaCare is currently collapsing.

Cruz Compromise

As I write these words, Senator Ted Cruz has offered a compromise in the Senate bill to address this last problem. He wants to allow insurance companies to provide low cost insurance plans with less complete coverage to those young and healthy people who don’t need the expensive coverage of ObamaCare. These “mini-med” plans were widely available before ObamaCare and were quite popular, but the Obama administration outlawed them when passing ObamaCare.

I hope this post will better educate you on the “language” of this healthcare debate. Unfortunately, you can’t count on critics of Republicans, or even the media, to explain exactly what they are saying.

 

If the officials that referee the game are biased, it’s very hard to win.

In the game of politics, the Congressional Budget Office (CBO) calls the game. The CBO is supposed to be non-partisan, not subject to political favoritism, so their “scoring” of the impact of proposed legislation is important. But how accurate is their work and how non-partisan?

If you’re a regular follower of this blog, you know I’ve discussed this issue before (How Accurate is the CBO?). Today, I discuss it further because of its importance in the current healthcare debate and because there is more evidence of the CBO’s shoddy work.

Three Different Bills – Same Conclusions

Avik Roy, healthcare economist writing in Forbes, compares the CBO scores of three different Republican healthcare bills:

• Restoring Americans’ Healthcare Freedom Reconciliation Act of 2015 (RAHFRA)
• American Health Care Act of 2017 (AHCA)
• Better Care Reconciliation Act of 2017 (BCRA)

 

1. RAHFRA – Full defund of ObamaCare and no replacement:

This bill passed both the House and the Senate in 2015, repealing the Individual Mandate, the ObamaCare Medicaid expansion, and all the subsidies for ObamaCare insurance exchanges including all of the ObamaCare tax hikes. No replacement of ObamaCare was in the bill (no funds to subsidize purchasing insurance). President Obama vetoed the bill.

The CBO scoring of the bill estimated 22 million fewer insured by 2026.

2. AHCA – Gradual defund of ObamaCare and flat tax credit replacement:

The AHCA passed the House earlier this year and was sent to the Senate for deliberation. It varied from the earlier RAHFRA bill in that the repeals of ObamaCare’s Medicaid expansion and exchange subsidies are phased out over several years. The bill also repeals the regulations that tend to drive up ObamaCare premiums; overcharging young people through 3:1 ratio age bands, and actuarial value mandates. The system of new flat tax credits will cost $375 billion over 10 years.

The CBO scoring of the bill estimated 23 million fewer insured by 2026.

In other words, spending $375 billion more than RAHFRA would actually reduce coverage by a million more!

3. BRCA – Gradual defund of ObamaCare and means-tested tax credit replacement:

The Senate alternative to the House AHCA bill replaces flat tax credits with means-tested tax credits. This benefits low income Americans more. The Senate bill spends $616 billion over 10 years compared to $375 billion for the AHCA. You would expect this $241 billion additional spending would lead to more people with insurance – right?

The CBO scoring of the bill estimated 22 million fewer insured by 2026.

In other words, the CBO believes the additional $241 billion spending buys coverage of only one million more. Even more ludicrous, if you compare these numbers to the RAHFRA, the CBO believes the additional $616 billion in spending for low-income Americans results in zero improvement in coverage! 

How can we explain these irrational numbers?

The answer seems to be the Individual Mandate. In the most recent scoring of the BRCA, the CBO estimates that 15 million people will voluntarily drop out of the insurance market if the Individual Mandate is lifted. This is expected in the first year after repeal of this mandate.

In other words, the CBO has “baked in” a 15 million reduction of the number of people insured with any repeal of the Individual Mandate – a government regulation that forces people to purchase a product they clearly don’t want.

It is ironic, if not tragic, that one of the most reviled portions of ObamaCare, the Individual Mandate – a new regulation so widely detested that it was challenged to the Supreme Court – has become the biggest obstacle in repealing and replacing ObamaCare with a new healthcare system that serves the people better. Somewhere on a golf course President Obama must be smiling.