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~ “ CBO estimates the Affordable Care Act will reduce number of hours worked by 1.5 per cent to 2 per cent during 2017 to 2024, that is by 2.5 million full-time equivalent workers, almost entirely because workers will choose to supply less labor.” ~ Congressional Budget Office, CBO, 2014
~ “Poor health costs the U.S. Economy $576 billion annually. $227 billion, or 39% of that is due to lost productivity. “ ~ Integrated Benefits Institute, IBI, 2012.
~ “Americans work 137 more hours per year than Japanese workers, 260 more hours per year than British workers, and 499 more hours per year than French workers.” ~ International Labor Organization, 2013
~ “Tea Party Patriots are working to : continue to press for dismantling of Obamacare and Obama’s assault on the Bill of Rights and the Constitution; push legislation that unshackles free markets and preserves our liberty.” ~ Tea Party Patriots, 2014.
A few days ago, in its latest “Budget and Economic Outlook”, the normally staid non-partisan Congressional Budget Office (CBO) put out a political bombshell analysis – see quote above. It said the Affordable Care Act (ACA) – a..k.a. Obamacare – would reduce the U.S. work force by two and a half million jobs by 2024. Of course, this was instantly seized upon by Republicans and other opponents to show that Obamacare really is the “job-killer” they had always said it was. Equally predictably, the Tea Party set high on its agenda for 2014 the “dismantling” of Obamacare along with other measures to “unshackle” free markets and preserve liberty. This comes on the heels of the administrative fiasco of the online start-up of the Federal health exchange. Add to that now Pres. Obama’s decision to waive for a year – until 2015 – requirements that certain small firms (with 50 to 99 workers) provide healthcare coverage to their employees or face penalties. With all this, like me, you might be forgiven for wondering if Obamacare was indeed veering off its agreed track. So, how should we interpret the CBO’s assessment and the Tea Party’s view?
Key Questions : How likely is it that Obamacare will lose America millions of jobs and what is the broader economic context? Is Obamacare really simply a government take-over of America’s private healthcare system, as the Tea Party contends? How does healthcare reform contribute to enhanced work and productivity in the future U.S. economy? Are the reforms adopted sufficient, or does more need to be done, and if so, what?
Healthcare Reform and Jobs : The CBO argues that, as their incomes grow, and the subsidy they get on purchasing healthcare is reduced, eligible – mainly lower income – workers will view this as a tax. That will be taken as a disincentive to work – because the more they work the less they will get to keep. Taken together, the CBO says, there are a large enough number of workers in this group, that millions of hours of work will be lost as they decide to work less. In a narrow technical sense, there is an economic logic to the CBO’s argument. After all, the more something is taxed the less we use it or do it. But in the current economic context of America today, this reasoning is rather abstract and unconvincing. U.S. unemployment at 6.7% is still very high by historical standards of the past thirty years. Many Americans are still out of work, working part-time, working two jobs, or often on reduced pay from before. Many lost healthcare benefits with the mass unemployment of the 2008-09 Great Recession.
Under such circumstances, in the real world, it is practically rather a stretch to imagine a lower income worker – say in a fast food outlet barely earning minimum wage – deciding to work less as his income finally began to improve. More likely, especially since his tax bracket would be low, he would opt to work more to be able to acquire other things he could now start to afford – a home, a car, raising a family, saving for college perhaps leading to better skills, and later a still better paying job. Steps up this ladder are what constitutes the American Dream for most of us. Where the abstract “homo oeconomicus” of the CBO sees only a tax causing a slackening of effort, American Everyman sees wants he or she still needs to work to fulfill. And the widening inequality of incomes and opportunities in American society since 1980 has only exacerbated these.
The CBO is, of course, correct that the share of the American population actively seeking work is set to decline in decades ahead. And the U.S. labor force will grow more slowly. But this cannot necessarily be laid at the door of the ACA. As recent Bureau of Labor Statistics (BLS)’ analysis shows, after a strong spurt of growth in the 1970s and 1980s with the Baby Boomer generation and the mass entry of women into work, the U.S. population is now aging and more are retiring. These forces combine to make the urgent need for comprehensive immigration reform the more pressing.
Healthcare Reform and Productivity : There are, too, important ways in which effective healthcare reform – greatly improving access and affordability of healthcare – will improve productivity and increase jobs – in terms of millions of hours worked each year. For, as widely differing public and private advocacy groups have contended – ranging from the Centers for Disease Control (CDC) to the Integrated Benefits Institute (IBI) representing the largest U.S. private employers – currently the U.S. economy is losing over half a trillion dollars annually in output due to worker ill health and illness. Eliminating these losses would add 4% to America’s economy – or the equivalent of over 5 million jobs. Currently, over 65 million Americans are uninsured and lack access to quality healthcare. This is not only a private individual matter. On that scale it is a major public policy issue, that, left unresolved would assuredly get still worse.
Healthcare Reform and Freedom of Choice : It is equally surprising how groups such as the Tea Party have seemingly clung to the old, now declining U.S. healthcare model based mainly on employer mandated group insurance plans, as the ultimate expression of freedom and the American way. In this view, Obamacare is seen as taking away freedom and usurping the private market. However, once again, practical reality is quite different. For most of us who have employer based health insurance, we never had freedom of choice. Rather we had to accept the plan offered by our employer, regardless of whether our and our family’s healthcare needs were different and not adequately covered. We had no freedom to opt out and choose a different insurer. Especially since individual private insurance is prohibitively expensive for the average American worker. By contrast, the health insurance exchanges being set up under Obamacare, offer Americans for the first time real choice and competition in the private marketplace. If it were not part of Pres. Obama’s healthcare reform law, you would have expected freedom loving, free market promoting conservatives to jump at it! Within hours of the Minnesota exchange being set up last October, a friend who is self-employed but too affluent to need any subsidy, was able to purchase a health insurance plan for his family that saved him a third of his previous cost. If such competitive exchange markets can be made to work, they can provide portability and affordability along with choice, which none of us had before. Isn’t it about time we told the Tea Party to put its money where its mouth is?
A further major advantage would be that the cost of healthcare was not left to encumber the income statements and balance sheets of America’s private businesses, while their competitors in Europe, Japan and other nations – which generally have state-run single-payer plans – bear no such costs.
Why U.S. Healthcare Reforms are Incomplete : For all their potential benefits, the ACA (Obamacare) represents still an incomplete reform that could still fail to meet America’s future needs. The system being so tortuously and painfully put in place, after so much contentiousness, acrimony and debate, offers only competition in health insurance to moderate prices. But not competition in actual provision of health care services. To all practical intents and purposes, the oligopoly and monopoly pricing practices that have contributed so much to driving up health care prices in America – to levels often two three times higher than elsewhere ! – are still largely intact. And consumer choice plays little effective role in helping set competitive market prices. This is so in all major segments of U.S. healthcare today : pharmaceuticals, testing laboratories, doctors’ practices, hospitals, etc. Indeed, the ACA seems to be ushering in a wave of corporate mergers and consolidations that may make private market competition even less the norm. Yet, it may only be by finding an efficient, preferably market-based way of containing costs and prices that the U.S. private health care system can hope to survive.
Conclusions : The ultimate irony at back of the contentious debate over healthcare reform in America may be that important elements of the ACA offer greater – not fewer – prospects for freedom of choice and private market competition in healthcare. Add to that, without further similar reforms – extending from insurance into actual provision of health care services, even the reforms so painfully carried out thus far may be ineffective.
I, for one, hope that our political and business leaders take a more open-minded, pragmatic view and work together to bring about more complete lasting, market-based healthcare reform for the benefit of all!