CBO Director Douglas Elmendorf said Wednesday that the Affordable Care Act creates a “disincentive for people to work” by providing them with subsidies for health care coverage.
“What the Affordable Care Act does, is to provide subsidies focused on lower- and lower-middle-income people to buy health insurance. And in order to encourage a sufficient number of people to buy an expensive product like health insurance, the subsidies are fairly large in dollar terms. Those subsidies are then withdrawn over time — withdrawn from people as their income rises,” Elmendorf told the House Budget Committee Wednesday during a hearing on Obamacare.
“By providing heavily subsidized health insurance to people with very low income and then lowering those subsidies as their income goes up, the act created a disincentive for people to work relative to what would have been the case in absence of the act,” he said.
He added that lower-income people will be “better off,” but admitted “they do have less of an incentive to work.”
Elmendorf’s testmony comes one day after the CBO released a report stating that the Affordable Care Act would lead to approximately 2 million fewer American workers by 2017.
“CBO’s current estimate for 2021 is a reduction in full-time-equivalent employment of about 2.3 million,” the report said. “The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in business’ demand for labor.”
The report explained that the Affordable Care Act would lead to more employees working part-time hours and leaving the workforce altogether.
“CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 to 2 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor — given the new taxes and other incentives they will face and the financial benefits some will receive,” the report added.
The report also stated that the disastrous rollout of the Obamacare website has cost about 1 million signups.
The CBO originally estimated that 7 million Americans would sign up for health care coverage through the state-based exchanges. But the botched website rollout has forced the CBO to revise the number down by 1 million.
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