CBO Director Says ObamaCare Will Drive People From the Workforce

CBO Director Says ObamaCare Will Drive People From the Workforce
Tuesday, October 26, 2010
By Matt Cover

(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 explained that people would choose not to work because they could subsist on the generous federal insurance subsidies and Medicaid payments contained in the health care overhaul.

“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.”

Elmendorf’s analysis of the health care law’s economic impact seems to support 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)
Elmendorf’s remarks further explain what the 2,000-plus-page "reform" package means in practical terms.

Already this year, major insurance companies, in anticipation of ObamaCare’s stringent regulations, stopped offering individual insurance policies for children.

In addition, 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.

Elmendorf, who is Congress’ chief accountant, said the Democrats’ health care bill will reduce unnecessary spending on health care by insured people -- but only to a "very limited extent" over the next decade. One of the main complaints about the health care law, even as it was being written, is that it doesn’t do enough to control costs.

Elmendorf also said the new law will expand the health care sector of the economy. That's because millions more people are expected to have health insurance by 2019 -- and the research suggests that "gaining insurance coverage will increase an individual’s demand for health services by about 40 percent." Elmendorf said this alone "would represent an expansion of the health sector of the economy..."

Elmendorf revealed that some of ObamaCare's so-called reforms may not be reforms at all. Analyzing the many provisions that are supposed to make health care more efficient and less expensive, Elmendorf said that there was little evidence any of them would actually work -- leading CBO to view their potential with skepticism.

“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," he said.

Elmendorf also said 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.”