January 18, 2011 in Nation/World

Health reform’s impact debated

Experts doubt GOP’s claim law will kill jobs
David Lightman McClatchy
 

WASHINGTON – Despite what Republicans say, the 2010 health care law isn’t necessarily a job killer, experts say.

Republicans have titled their effort to overturn the law the “Repealing the Job-Killing Health Care Law Act,” and that’s their favorite talking point against it. The House of Representatives will start debate on repeal today; a vote is likely Wednesday.

Saying that the law is a job killer doesn’t necessarily make it one, however, and independent experts say that such a conclusion is at least premature, if not unfounded.

“The claim has no justification,” said Micah Weinberg, a senior research fellow at the centrist New America Foundation’s Health Policy Program.

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.

House Republicans defend their job-killer claim in a 19-page Jan. 6 report, “ObamaCare: A Budget-Busting, Job-Killing Health Care Law.” But some of its points are out of date or omit offsetting information that would weaken the argument.

For instance:

• The report says that a study by the National Federation of Independent Business, “the nation’s largest small business association, found that an employer mandate alone could lead to the elimination of 1.6 million jobs between 2009 and 2014, with 66 percent of those coming from small businesses.”

But that study was released on Jan. 28, 2009, well before the law was written. It studied a model, not the law that was enacted eventually, and it was based on a different set of assumptions.

“It’s old. We don’t use it anymore because it was based on a hypothetical mandate,” NFIB spokeswoman Stephanie Cathcart said. While her group still thinks that the law will hurt business job growth, it cites no firm number.

Michael Steel, a spokesman for House Speaker John Boehner, R-Ohio, said: “The (NFIB) report analyzes the effect of an individual mandate. Obamacare includes an individual mandate. We make that clear in the report.”

• The GOP report says: “Economic theory suggests the penalty should ultimately be passed through (as) lower wages (to an employee),” quoting a Congressional Research Service report.

But Republicans chop that sentence short; the CRS version goes on to say that the penalty for not offering coverage “would not be a burden on small business owners.”

A central problem with concluding flatly that the measure will kill jobs, experts say, is that the law’s impact on the economy depends on a host of unpredictable variables.

“There are so many cross-currents it’s hard to know what will happen,” said Chris Varvares, the president of Macroeconomic Advisers, a St. Louis-based economic research firm.

To analyze the GOP claims, experts advise considering these questions:

• Will the law help or hurt economic growth?

The nonpartisan Congressional Budget Office estimates that the measure will reduce federal budget deficits by about $230 billion over 10 years. Boehner has disputed the estimate, saying “CBO is entitled to their opinion.”

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.

• Will the law’s mandates discourage hiring? Maybe, but it’s hard to tell yet.

The CBO found last August that employers’ hiring decisions will be affected “in some cases by the health care legislation,” adding that many of the law’s effects “may not be felt for several years because it will take time for workers and employers to recognize and to adapt to the new incentives.”

Employer mandates in isolation would “mean wages would decline, because a larger portion of compensation goes into health insurance, and Republicans are right on that,” said Chandra, of Harvard.

But because there’s also an individual mandate, “individuals would value the health care benefit, and would be willing to work for less wages, thereby reducing and perhaps completely eliminating the employment effects,” Chandra said.

• Will minimum-wage, unskilled workers be particularly hurt?

“It’s not an irrational position,” said Weinberg, of the New America Foundation, “but there is vastly stronger justification for the claim that it will create jobs than that it will eliminate them.”

The Republican report quotes an August 2010 CBO report that says that because companies generally can’t pay less than the minimum wage, the law “will probably cause some employers to respond by hiring fewer low-wage workers.”

It also cites the CBO as saying that “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.”

But the CBO didn’t conclude firmly that the law is a “job killer.”

In its next sentence, which doesn’t appear in the GOP report, the agency wrote: “More generally, the health care legislation may shape the labor market or the operations of other segments of the economy in ways that are difficult to anticipate or quantify.”

In other words, it’s too early to know.

Boehner spokesman Steel said that omitting that passage wasn’t misleading, and that it didn’t compromise the Republican point.

• What changes may yet be made that would modify the law’s impact? A host of regulations must be fleshed out to define how the law will work before it takes full effect.

“There are so many important parts of the law yet to be written,” Chandra said.

The CBO warned in a Jan. 6 letter to Republicans that “assessing the effects of making broad changes in the nation’s health care and health insurance systems (or of repealing the changes) requires assumptions about a broad array of technical, behavioral and economic factors.”

In short, no one knows the economic impact of the law for sure, and most independent experts think that condemning it as a job killer is hard to justify.

“For any policy to be effective, it has to be adaptable. You have a health system that, like the economy, is evolving all the time,” said Eugene Steuerle, a senior fellow at the Urban Institute, a mainstream research center. “At this point all an economist can do is try to tease out different pieces of the puzzle.”


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