Tuesday, September 9, 2014

Univ. of Chicago Econ Professor: The Myth of ObamaCare's Affordability

In summary
  • Americans will work fewer hours less productively under the perverse disincentives of PPACA 
  • Society has to make sacrifices in order to deliver healthcare to more people
  • Workers and production are taken away from other industries to beef up healthcare 

The following is from Casey Mulligan writing in the Wall Street Journal.  His entire post is certainly worth the time to read.  Here is an excerpt:
... Although the ACA helps specific populations by giving them a bigger slice of the economic pie, the law diminishes the pie itself.  It reduces the amount that Americans work, and it makes their work less productive. This slows growth in both personal income and gross domestic product. 
In further expanding the frontiers of redistribution, the ACA reduces the benefits of employment for both employers and employees. Employers that don't provide health insurance are either subject to large penalties based on the number and types of employees that they have, or are threatened with enormous penalties when they get the opportunity to expand their business. About a quarter of the nation's employees, more than 35 million men and women, currently work for employers that don't offer health insurance. These tend to be small and midsize businesses with employees who already make less than the average American worker. The result of penalizing businesses for hiring and expanding is going to be less hiring and expanding. 
Another sixth of the nation's employees—almost 25 million people—are in a full-time position that makes them ineligible for the law's new and generous assistance with health-insurance premiums and cost sharing. They are ineligible for subsidies simply because they are working full time and thereby eligible for their employers' coverage. Because the only ways for them to get the new assistance is to move to part-time status, find an employer that doesn't offer coverage, or stop working, we can expect millions of workers to make one or more of those adjustments. 
Most people wouldn't give up working merely to qualify for a few thousand dollars in assistance. But it is a mistake to assume that nobody is affected by subsidies, because there are people who aren't particularly happy with working, planning to leave their job anyway, or otherwise on the fence between working and not working. A new subsidy is enough to push them over the edge.... 
The law has effects that extend well beyond the employment rate and the average length of the workweek. People, businesses and entire sectors will jockey to reduce their new tax burdens or enhance their subsidies. Their adjustments to the new incentives will make our economy less productive and stifle wage growth, even among workers who have no direct contact with the law's penalties and subsidies. 
The "29er" phenomenon is a good example of how the law harms productivity. Because ACA's "employer mandate" requires firms with 50 or more full-time workers to offer health plans to employees who work more than 30 hours a week, many employers and employees have adopted 29-hour work schedules. This is not the most productive way to arrange the workplace, but it allows employers to avoid the mandate and its penalties....
... [T]his ... exacerbates the societal problem that the economy cannot expand its health sector without giving up something else of value.... The ACA as a whole will have the nation working fewer hours, and working those hours less productively. 
I estimate that the ACA's long-term impact will include about: 
  • 3% less weekly employment, 
  • 3% fewer aggregate work hours, 
  • 2% less GDP and 
  • 2% less labor income. 
These effects will be visible and obvious by 2017, if not before. The employment and hours estimates are based on the combined amount of the law's new taxes and disincentives and on historical research on the aggregate effects of each dollar of taxation. The GDP and income estimates reflect lower amounts of labor as well as the law's effects on the productivity of each hour of labor. ...