Report: PPACA Will Have Small Impact on Employment

This past February, the Congressional Budget Office released a report predicting the Patient Protection and Affordable Care Act will reduce the total number of hours worked by employees nationwide by 1.5 percent to 2 percent from 2017 to 2024.

According to the CBO, that decline will occur primarily because workers will choose to supply less labor because of the new incentives  and the financial benefits for some. Overall, the report projects the reduced hours will equate to a decline in the number of full-time-equivalent workers of about 2 million by 2017, rising to 2.5 million in 2024.

This prediction led conservative policymakers to label the law a "job killer," according to a report from The Washington Post. However, despite concerns that the PPACA will harm the economy, a new report from the Urban Institute concludes the healthcare reform law won't have a significant effect on the job market. Additionally, the report emphasizes any effect on unemployment will result from people voluntarily choosing to work less, rather than employers eliminating jobs.

"The [PPACA] is no different from any social program that provides benefits linked to income," says report co-author Bowen Garrett, PhD, an economist and senior fellow in the Urban Institute's Health Policy Center. "What our study did is take a look at the most relevant and direct evidence on how big this type of effect could be. Our review of the evidence suggests this type of employment effect of the [PPACA] will be small."

First of all, Dr. Garrett and his co-author write the PPACA isn't the first "means-tested" public policy to link the receipt and level of benefits to income — the Supplemental Nutrition Assistance Program, Temporary Assistance to Needy Families, the Housing Choice Voucher Program and the Earned Income Tax Credit all share this feature, according to the report. Most of these programs can decrease their recipients' work effort by providing resources and benefits that decrease in conjunction with greater income.

"The potential for the ACA to lead to fewer people working is a feature of almost all means-tested programs. In this regard, there is nothing special about the [PPACA]," the report states. "Given this, there is no reason to single out the [PPACA] for special scrutiny, as has been done by some policymakers and advocates."

Second, the analysts looked at recent studies of the effects of subsidized health insurance on employment. One notable study, for instance, examined Oregon's expansion of Medicaid in 2008 to adults with incomes below the federal poverty level. In that study, enrollment in Medicaid was associated with "very small and statistically insignificant changes in employment and earnings" — a 1.6 percentage point, or 3 percent, lower probability of working and a $195, or 3 percent, decline in annual earnings. Other studies of state Medicaid expansions show similarly minor effects, according to the report.

Furthermore, the report notes Massachusetts' 2006 healthcare overhaul — which included many of the same provisions as the PPACA — has had "no statistically or economically significant effect on employment" in the state. "The Massachusetts reform is the best, most similar thing we have to get evidence from," says Dr. Garrett. "Because we find basically no effect in Massachusetts, the effect for the [PPACA] is also likely to be small."

Overall, the report concludes " the best and most direct evidence to date suggests that the labor market consequences of the [PPACA] are likely to be small."

More Articles on the PPACA:
6 Key Statistics on PPACA Enrollment for 2014
Does the New CBO Report Help or Hurt ObamaCare?  
CBO Lowers Estimated Cost of PPACA Insurance Provisions By $9B