Getting the Math Wrong on Obamacare

Critics using new Congressional Budget estimates to club the Affordable Care Act haven’t read the report Kevin Lamarque/Reuters

The release of new projections about the impact of the Affordable Care Act has set off a firestorm in Washington about job losses, deficits and people losing coverage. But reading the actual document – rather than the talking points – shows that there is a lot less there than the politicians proclaim.

There have been some reports that Congressional Budget Office estimates show the law – better known as Obamacare – will cause the loss of two million jobs. Not really: What the document says is that people will choose to cut back their work hours because they will have insurance available elsewhere, because subsidies will offset the cost of insurance they might already be paying or because of related tax charges.

“The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor,’’ the CBO states, “so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).’’

The report concludes that the job supply will grow; even though more people will choose to cut back on their hours, total employment and compensation will increase. Put simply: almost all the folks in that  two million number (which is not two million jobs, but the man-hours equal to two million jobs) will not lose a job, but will choose to leave it or cut back their time committed to work. For example, people who choose to retire early because they would now have insurance available outside of employment can be counted among those two million.

The claim that the report shows increased deficits is also wrong. The CBO does say that the total expenditures for the health insurance exchanges set up under Obamacare and other insurance coverage provisions will be higher than the total amount of revenues, but that has always been the case. The number that matters is the total effect the law has on the deficit.

And the law, in total, will decrease the deficit, the CBO reports. “Those estimates (showing deficits) address only the insurance coverage provisions of the ACA; they do not constitute all of the act’s budgetary effects. Many other provisions, on net, are projected to reduce budget deficits.’’

Another part of the report being misrepresented is about the number of people who will be obtaining insurance. The CBO has reduced its estimates for that because of the lousy rollout of the Obamacare exchanges. The total impact on insurance coverage by the law, however, has not changed.

“CBO and JCT estimate that the insurance coverage provisions of the ACA will markedly increase the number of non-elderly people who have health insurance—by about 13 million in 2014, 20 million in 2015, and 25 million in each of the subsequent years through 2024,’’ the report says.

Then there is one number that may damage efforts by Congressional Republicans to legislate some changes to Obamacare – and potentially even demand those proposals be adopted in exchange for increasing the debt ceiling. In recent weeks, Republicans have begun advancing the idea that a program in Obamacare known as “risk corridors” amounts to a potential bailout of the insurance industry. But the CBO report says that risk corridors will save money, not cost it.

"CBO now projects that, over the 2015–2024 period, risk corridor payments from the federal government to health insurers will total $8 billion and the corresponding collections from insurers will amount to $16 billion, yielding net savings for the federal government of $8 billion," the budget office wrote.

The CBO acknowledges that these numbers are preliminary. Nevertheless, the finding means that, if the usual rules are applied to the Republicans’ proposal on risk corridors, proponents of the change will have to find $8 billion elsewhere to make the legislation revenue neutral. And trying to tie something to the debt ceiling that might increase the debt would be a challenge politically.

Is the CBO correct? Who knows? As with any predictions, these estimates are based on economic models and assumptions, and those can be wrong or they can change. But the CBO certainly has not provided any serious new information that can be used by the critics of Obamacare. So, when politicians and commentators say that the new CBO report is devastating proof of the terrible impact of Obamacare, just know this: they’re lying.

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