FACT SHEET | March 7, 2011

Republican Myths about the Impact of the Affordable Care Act on Jobs

In their efforts to repeal and defund the Affordable Care Act, Republicans continue to make false claims about the impact of the law on federal and state budgets, the economy, and our current health care system.  They ignore nonpartisan analysis from the Congressional Budget Office (CBO) and other independent experts and instead concoct arguments based on flawed assumptions for their own political purposes.   This is the second in a series of DPCC Fact Sheets meant to dispel Republican myths regarding the Affordable Care Act. 

Myth: Health reform will kill 800,000 jobs over a ten year period

Reality: Independent, nonpartisan analyses demonstrate that ACA will grow our economy, empower small businesses, and benefit families.

Republicans are blatantly misrepresenting CBO Director Douglas Elmendorf’s recent testimony before the House Ways and Means Committee, claiming that the Affordable Care Act will “kill” jobs.  Republicans are twisting his testimony for political gains. [GOP Report, 2/7/2011] These tactics come after months of Republicans ignoring other CBO projections demonstrating the benefits of the law, including that it will reduce the deficit by $210 billion between 2012 and 2021. [CBO, 2/18/2011] 

I. Clarifying CBO Projections

The CBO analysis is more nuanced than the Republicans have articulated.CBO projects that that the Affordable Care Act will slow the growth rate of health care costs while providing access to affordable insurance coverage for individuals, families, and small businesses.  Because less of their hard-earned income will go to pay their insurance premium, the CBO tells us that millions of Americans will have increased financial resources by 2021.  Since they’ll be able to keep more of their own money, rather than paying it out in insurance premiums, some individuals may have decide to leave the labor market earlier than initially anticipated. [CBO, 8/1/2010] 

• “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.” [CBO, 8/1/2010]

For the segment of the population considered in the CBO projection, the amount of labor that workers choose to supply will be impacted by subsidies reducing the cost of health insurance obtained through the state exchanges and the expansion of Medicaid eligibility.

• “The expansion of Medicaid and the availability of subsidies through the exchanges will effectively increase beneficiaries’ financial resources. Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market.” [CBO, 8/1/2010]

New consumer protections, including prohibitions on insurance plans from varying premium prices based on age, will allow more older Americans to purchase plans outside of the workplace and retire earlier than they otherwise would. Additionally, individuals living with pre-existing conditions may no longer have to work two jobs in order to have access to health insurance.

• “As a result, some older workers will choose to retire earlier than they otherwise would.” [CBO, 8/1/2010]

At the same time, CBO projects that the Affordable Care Act could remove some disincentives for Medicaid beneficiaries to work.

• “In contrast, another feature of the Medicaid expansionremoves an existing disincentive to work formany low-income individuals…The health care legislation willallow parents to work and still qualify for Medicaiduntil their income exceeds 138 percent of the FPL.Moreover, parents whose income exceeds the new,higher threshold may be able to work and receive thetax credits and cost-sharing reductions for insurancepurchased through the exchanges.”  [CBO, 8/1/2010]

Although CBO does project that some employers’ decisions could be impacted by the legislation, they conclude that employers will be as likely to hire additional workers as not hire additional workers resulting from the law.

• “Employers with 50 or more employees will be required to pay a penalty if they do not offer insurance or if the insurance they offer does not meet certain criteria and at least one of their workers receives a subsidy from an exchange. … However, firms generally cannot reduce workers’ wages below the minimum wage, which will probably cause some employers to respond by hiring fewer low-wage workers. Alternatively, because firms are penalized only if their full-time employees receive subsidies from exchanges, some firms may instead hire more part-time or seasonal employees.” [CBO, 8/1/2010]
   
• “Since the law contains dual mandates that most individuals must obtain health insurance coverage and most employers must offer it by 2014, ‘the effect on employment is probably zero or close to it,’ said Amitabh Chandra, a professor of public policy at Harvard University.” [McClatchy Newspapers, 1/17/2011]

As discussed above, Republicans ignore important components of the CBO analysis.  Director Elmendorf had an opportunity to clarify his response during the House Ways and Means hearing.

• Rep. Chris Van Hollen (D-Md.), the ranking member on the Budget Committee, asked Elmendorf to explain clarify his response.  ‘One of the impacts you said was that there will be some individuals who, because they can get their health care through the exchange ... would now have the freedom to choose to not get a job simply because they needed the health care,’ Van Hollen said, according to a transcript from CQ. ‘Isn't that correct?’ ‘Yes, that's right,’ Elmendorf replied.” [The Hill, 2/10/2011]

II. Independent, nonpartisan analyses demonstrate that ACA will grow our economy, empower small businesses, and benefit families.

ACA will grow our economy:

• Since the Affordable Care Act was signed into law, the economy has created over 1.5 million private sector jobs.  The unemployment rate in February 2011 was 8.9%, lower than it was in March 2010—9.7%. [WH, 3/4/2011]
   
• With the addition of 220,000 private sector jobs in February, sectors with the largest payroll employment growth were professional and business services (+47,000), and education and health services (+40,000).  [WH, 3/4/2011]
   
• By slowing the growth of healthcare costs for employers and individuals and increasing demand for healthcare goods and services, ACA could create as many as 400,000 new jobs this decade.  [CAP, 1/2011]
   
• In a letter to the House Education and Workforce Committee, prominent economists and distinguished scholars argue that, “leaving in place the Patient Protection and Affordable Care Act of 2010 will significantly strengthen our nation’s economy over the long haul and promote more rapid economic recovery in the immediate years ahead. Repealing the Affordable Care Act would cause needless economic harm and would set back efforts to create a more disciplined and more effective health care system.” [Letter to EW, 1/26/2011]

ACA will empower small businesses:

• Research from the Small Business Majority “shows that without reform, small businesses would pay nearly $2.4 trillion over the next 10 years in healthcare costs for their workers; 178,000 small business jobs, $834 billion in small business wages, and $52.1 billion in profits would be lost due to these costs; and nearly 1.6 million small business workers would continue to suffer from ‘job lock.’” [Small Business Majority, 1/26/2011]
   
•  ACA “reduces small businesses’ health care expenses by giving them $40 billion worth of tax credits, and through the creation of new, competitive state-based insurance Exchanges.  Exchanges will enable individuals and small businesses to pool together and use their market strength to buy coverage at a lower cost, the same way large employers do today, giving them the freedom to launch their own companies without worrying whether health care will be available when they need it.” [WH, 1/7/2011]
   
•  “Augustine Faucher, the director of macroeconomics at Pennsylvania-based Moody's Analytics, said that the law's deficit savings should ‘bring down interest rates and free up more capital for private firm investment, and therefore could boost long-run growth’ and create more jobs.”  [McClatchy Newspapers, 1/17/2011] It is estimated that 4 million small businesses that provide health care to their employees are eligible for tax credits through the Affordable Care Act starting this year. [WH, 4/1/2011]
   
• The Main Street Alliance, a national network of small business coalitions, supports the Affordable Care Act, writing that “rolling back the provisions of the Affordable Care Act would be bad business for small business.” [Main Street Alliance, 1/18/2011]

ACA will benefit families:

• “The law widely expands coverage to Americans, thereby reducing the hidden tax of about $1,000 that families with insurance pay each year in additional premium costs to cover the uncompensated costs of the uninsured.” [WH, 1/7/2011]
   
• “Caps what insurance companies can require families to pay in out-of-pocket expenses, such as co-pays and deductibles, prohibits lifetime limits on how much insurance companies cover if beneficiaries get sick, and regulates the use of annual limits to ensure access to necessary care, until 2014 when annual limits are prohibited.” [DPC, 4/1/2010]
   
• “Requires premium rate reviews to track any arbitrary premium increases, cracks down on excessive insurance overhead by applying standards on how much insurance companies can spend on non-medical costs, such as bureaucracy and advertising, and provides consumers a rebate if non-medical costs are too high. Provides sliding scale premium tax credits for families that cannot afford quality health insurance.”  [DPC, 4/1/2010]

This DPCC Fact Sheet demonstrates how Republicans blatantly misrepresent CBO Director Douglas Elmendorf’s testimony.  Please find additional resources related to these and other arguments below.

Washington Post: http://voices.washingtonpost.com/fact-checker/2011/02/playing_games_with_cbo_testimo.html

Factcheck.org: http://factcheck.org/2011/01/a-job-killing-law/

White House: http://www.whitehouse.gov/blog/2011/01/07/repealing-affordable-care-act-will-hurt-economy

DPC