CBO Director: ObamaCare Will Drive People from the Workforce

By Matt Cover | October 27, 2010 | 6:00 AM EDT

President Barack Obama makes a statement to the nation Sunday night, March 21, 2010, following final House passage of the health care bill in the East Room of the White House. (AP Photo/J. Scott Applewhite)

(CNSNews.com) – Congressional Budget Office Director Douglas Elmendorf said the most significant economic effect of President Barack Obama’s health care reform package will be to drive people out of the job market.

“For the economy outside the health sector, the most significant impact of the legislation will be through the labor market,” Elmendorf said on Oct. 22. 

 “We estimated that the legislation, on net, will reduce the amount of labor used in the economy by roughly half a percent, primarily by reducing the amount that people choose to work.”

Elmendorf made the remarks at a conference sponsored by the Leonard D. Schaeffer Center for Health Policy and Economics at the University of Southern California.

He went on to explain that the reason people would choose not to work was because they could subsist on the generous federal insurance subsidies and Medicaid payments contained in the reform.

“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,” he said, adding that “[t]he net reduction in the supply of labor is largely attributable to the substantial expansion of Medicaid and the provision of subsidies through the new insurance exchanges,” he said.

Elmendorf’s remarks help to further reveal in detail exactly what the 2,000-plus-page reform package means in practical terms. Earlier in the year, for example, major insurance companies, in anticipation of ObamaCare’s heavy regulations, stopped offering individual insurance policies for children.

Also, McDonald’s and other large corporations signaled that they would have to stop offering health care coverage for their mostly hourly workers because of mandates in the new law that dictate how much premium revenue companies can put toward administrative and other expenses. McDonald’s was granted a waiver by the Department of Health and Human Services (HHS).

Elmendorf’s analysis of the health care law’s economic impact seems to give credence to House Speaker Nancy Pelosi’s (D-Calif.) seemingly off-the-cuff remark in May when she said that because of the subsidies in the health care bill, people could quit their regular jobs and pursue their artistic dreams because the government would now provide for their health care.

“We see it as an entrepreneurial bill,” Pelosi said on May 14, “a bill that says to someone, if you want to be creative and be a musician or whatever, you can leave your work, focus on your talent, your skill, your passion, your aspirations because you will have health care.” 

Congressional Budget Office Director Douglas Elmendorf testifies before the Senate Budget Committee on Jan. 28, 2009. (AP File Photo/Pablo Martinez Monsivais)

Elemndorf also reported that the impact of the health package on the 1/6 of the economy dominated by the health care industry would also be affected because of the law’s provisions.

Like the impact on the labor market, however, these effects would be relatively small, Elmendorf said.

“The legislation set up a number of experiments in delivery and payment systems to induce providers to offer higher-quality and lower-cost care,” he said. “However, for a number of reasons, it is unclear how successful the experiments will be.”

“As a result, CBO projects limited savings from the experiments in delivery and payment systems during the next decade (taking into account the possibility that savings could be more or less than we anticipate),” he said.

Elmendorf, who is Congress’ chief accountant, also explained that it is doubtful that lawmakers will be able to carry out the law’s vision of slowing the growth of Medicare. “It is unclear whether such a reduction in the growth rate of [Medicare] spending could be sustained,” he said, “and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care.”

Elemendorf also undermined the Obama administration’s claim that beefed-up insurance regulations would spur competition and lower prices, calling the impact of those regulations “very small.”

“The legislation changed the regulation of private health insurance,” he said. “Those changes will reduce administrative costs and increase competition among insurers in the nongroup market. The overall effect on spending from those changes will be a very small reduction.”