Monday, October 25, 2010

Obamacare and Unemployment

Cross-posted from Critical Condition on National Review Online.


This afternoon, Senators Tom Coburn (R., Okla.) and John Barrasso (R., Wyo.) released a 27-page report entitled “Grim Diagnosis: A Check-Up on the Federal Health Law.” The piece reviews some well-known criticisms of Obamacare, especially its impact on the deficit. But the report’s point of emphasis—one that deserves broader mention—is the law’s impact on jobs and unemployment.

For example, Coburn and Barrasso point us to the Congressional Budget Office’s August economic outlook, in which CBO estimates that the law’s Medicaid expansion and insurance subsidies will shrink the labor market by approximately one half of one percent. That is the equivalent of around 780,000 jobs: about 50 percent more than are sponsored by GM, Ford, and Chrysler combined.

Another point in the report that deserves further attention is the Ponzi scheme known as the CLASS Act: a new assisted-living entitlement that is almost certain to add hundreds of billions to the federal debt. As Sens. Coburn and Barrasso write:
CBO determined  that the “CLASS program could be subject to considerable financial risk in the future if it were unable to attract a sufficiently healthy group of enrollees.” Unfortunately, CBO also found this is a likely outcome, saying “attracting healthy enrollees could be challenging for several reasons.” Because the law requires the CLASS program to enroll all eligible individuals who apply, CBO said it is “likely that some enrollees would be people who were unable to obtain coverage in the private market because of their poor health status.” So, with a higher percentage of the CLASS program participants consisting of individuals who are sicker and more needy—and therefore cost more to care for—CBO concluded the “relatively small enrollment would increase the risk of adverse selection and could undermine the long-run stability of the program.”
I’ve posted a more extensive summary of the Coburn/Barrasso report over at ObamaCare Watch.

6 comments:

  1. You forgot to mention that one has to pay in to CLASS for 5 years in order to receive benefits, or did they change that?

    This was interesting.

    "Because the law requires the CLASS program to enroll all eligible individuals who apply, CBO said it is “likely that some enrollees would be people who were unable to obtain coverage in the private market because of their poor health status.” So, with a higher percentage of the CLASS program participants consisting of individuals who are sicker and more needy—and therefore cost more to care for—CBO concluded the “relatively small enrollment would increase the risk of adverse selection and could undermine the long-run stability of the program.”

    What happens to those people now? Do you have an alternate plan?

    From page 48 of the CBO report.

    "The Congressional Budget Office (CBO) estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply. That net effect reflects changes in incentives in the labor market that operate in both directions: 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. Moreover, many people will be unaf- fected by those provisions and will face the same incentives regarding work as they do under current law."

    They are predicting that this will largely be a decision on the part of workers. Interested people should go to page 47. However, you may be correct about firms that employ more than 50 workers.

    http://cbo.gov/ftpdocs/117xx/doc11705/08-18-Update.pdf

    Steve

    Steve

    ReplyDelete
  2. Hi Steve,

    > What happens to those people now? Do you have an alternate plan?

    Private insurance is perfectly capable of providing for long-term care.

    > They are predicting that this will largely be a decision on the part of workers. Interested people should go to page 47. However, you may be correct about firms that employ more than 50 workers.

    Whether it's a decision of the workers or not is not the issue: the issue is that disincentivizing people from being more economically productive reduces tax revenues and economic growth, and thereby increases the deficit and unemployment.

    ReplyDelete
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