What Did CBO Really Mean By 2 Million Jobs Lost?

This week, messaging was the name of the game. On Tuesday, the nonpartisan Congressional Budget Office (CBO) released an economic reportsaying that the healthcare law may cause Americans to work fewer hours — enough to be the equivalent of 2 million fewer jobs in 2017, which is nearly three times as high than what CBO has reported in the past. But the devil is always in the details. Yes, the report said that the equivalent of jobs lost would equal 2 million, but it also said it’s in large part about the number of hours people choose to work, not actual job loss. The report’s purpose is an analysis of the impact of PPACA on the supply of labor, or how many people chose to enter into the workforce. Basically, the CBO report was a report of incentives, whether or not PPACA increases or decreases incentives for Americans to work, and no one really knows how this will all play out over time.Image

As you can imagine, Republicans, once the report was released, went crazy with Facebook posts, tweets and public statements about how the president’s signature healthcare law is hurting the American workforce. As expected in response, the White House almost immediately published a blog post and began making their own public statements to put their spin on the report. Their basic argument is that PPACA will allow people who want to work less to do so because they will be able to get health insurance through the exchanges rather than through an employer. According to the White House, the law stops “job lock,” the phenomena where a person is afraid to quit a job and say start a small business because they will lose benefits. Conventional wisdom says the White House can spin all they want, though, and the 2 million number will still loom large over the 2014 election cycle.

The report also highlighted other important statistics that were overshadowed by the job loss numbers. CBO lowered the predicted exchange enrollment numbers from 7 million down to 6 million for this year. While it is a significant drop, we’re actually a little surprised it didn’t plunge a little further given how well the exchange websites have been working. Additionally, CBO reported that the risk corridors would save $8 billion in the long term. Why would it save so much money? Because the program is supposed to pay health insurers that have higher-than-expected costs, but the money flows both ways. So if insurers’ costs are lower than expected, the health plans are supposed to pay the government, resulting in cost-savings. CBO predicts that it will collect more from insurers than it actually gives to them in the first place.  Time will tell…

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