The Corner

Misunderstanding Obamacare and Work

Andrew Ross Sorkin writes in the New York Times:

In 2014, the Congressional Budget Office released a report estimating that the Affordable Care Act would “reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024” — a seemingly disastrous outcome for the economy. But, the director of the office, Doug Elmendorf, later wrote, “The reason for the reduction in the supply of labor is that the provisions of the A.C.A. reduce the incentive to work for certain subsets of the population.” In other words, a lot of people worked because they had to, in order to keep their insurance. Now they could quit, even if they were sick; a positive development for them, but with a perverse effect on the economy.

That’s misleading. Here is the very next sentence from Elmendorf: “For example, under the ACA, health insurance subsidies are provided to some people with low income and are phased out as their income rises; as a result, a portion of the added income from working more would be offset by a loss of some or all of the subsidies, which represents an implicit tax on earnings.” That’s not just another way of saying that people will stop working because they don’t need jobs to have insurance. It’s a different way Obamacare affects work.

The CBO report itself mentions both effects, but places more emphasis on how Obamacare’s subsidy structure raises implicit taxes on work than on how it makes work less necessary by weakening its link to health insurance.

Ramesh Ponnuru is a senior editor for National Review, a columnist for Bloomberg Opinion, a visiting fellow at the American Enterprise Institute, and a senior fellow at the National Review Institute.