Economy
4:21 am
Fri February 28, 2014

CBO Assesses Affordable Care Act's Economic Effects

Originally published on Fri February 28, 2014 6:27 am

Transcript

DAVID GREENE, HOST:

On a Friday, this is MORNING EDITION, from NPR News. I'm David Greene.

The Affordable Care Act will change the way millions of Americans think about their jobs. That's essentially what the Congressional Budget Office has said in its assessment of the law's effect on the economy. They think the law will give some people the option to retire early and others the flexibility to work less.

As NPR's John Ydstie reports, this is already happening.

JOHN YDSTIE, BYLINE: Karin Warren hated her full-time job as a technical writer for a technology company in Corvallis, Oregon.

KARIN WARREN: I was experiencing some pretty heavy job burnout. It's a very stressful job, and I was very unhappy.

YDSTIE: It was made worse by a bout of breast cancer in 2012. Warren, who's single, wanted to work less, but couldn't. She needed her employer-sponsored health insurance. Then in November of 2012, when President Obama was reelected, Warren says she realized the Affordable Care Act would be implemented, and her situation could change.

WARREN: I cried that night. I was so happy, because I knew that was my ticket to freedom.

YDSTIE: She quit her job early in 2013, insured herself through Cobra, and then got covered by Obamacare in January of this year.

WARREN: So, now I'm working happily a half-time job. I'm more relaxed and feel healthier than I did before. And my health insurance is in place and it's affordable, and I'm in bliss.

YDSTIE: Part of the reason Warren's health insurance is affordable is that she earns less at her part-time job and qualifies for a subsidy. Her monthly premium is just $131.

WARREN: Without the subsidy, that 131 would be closer to $500.

YDSTIE: MIT labor economist David Autor says that the CBO is right: the ACA will incentivize some people to work less.

DAVID AUTOR: If we move into a world, all of a sudden, where you can get health care relatively affordably through the individual marketplace, on the one hand, and in addition, you receive a subsidy for that, that's going to cause some people to say, well, I don't need to work as many hours. Or I can choose to not participate at present.

YDSTIE: Deciding not to participate is exactly what Todd Ryder did. He was a database administrator in Helena, Montana.

TODD RYDER: I've always wanted to and thought about retiring early, and then with this Affordable Care Act situation, it looked kind of promising for me in terms of having that flexibility, you know, of having medical coverage without having to have employment.

YDSTIE: Ryder quit his job this month at age 52, and has signed up for health care under the ACA.

David Card, a labor economist at UC Berkeley, says there will undoubtedly be some people like Ryder who choose to retire early. But, Card says, the CBO's analysis doesn't take into account some evidence from studies in the real world.

Card looked at whether there is an abrupt flood of people quitting their jobs, or reducing to part-time hours when they become eligible for Medicare. He found no abrupt change in employment patterns.

DAVID CARD: You might think that the availability of that good insurance would cause them to, if they really were waiting around and just dying to get out of work, that they would stop the minute they got to 65. And you don't see that.

YDSTIE: So he wonders whether the Affordable Care Act will actually have the effect of reducing hours worked by the equivalent of two-and-a-half-million jobs by 2024, as the CBO forecasts. Card says right now, it wouldn't be hard to find workers willing to take the hours or jobs being vacated by others.

CARD: Right now - and maybe for the next few years, even - that's not going to be the major concern.

YDSTIE: But when the economy returns to more normal levels of employment, having some workers withholding their labor will likely slow growth, says David Autor - at least a bit.

CARD: I don't think this is enormous, relative to the other types of economic fluctuations that we've seen.

YDSTIE: But, Autor adds, the government subsidies will have to be paid by someone, which means taxation somewhere in the economy, and that will reduce economic efficiency.

Added dollars spent on health care because of the ACA will create some jobs and growth, and there are some who argue providing health insurance will create happier, healthier and more productive workers. That may turn out to be true, says Autor, and he agrees there are physic benefits to individuals. But so far, he says, there's no hard evidence of actual improvements to health or overall economic activity.

John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.