Posts tagged ‘ACA’

Newsflash: Apparently, Obamacare will Reduce Full-Time Employment. Who Would Have Guessed?

The Washington Post reports on an updated CBO report:

The Affordable Care Act will reduce the number of full-time workers by more than two million in coming years, congressional budget analysts said Tuesday in the most detailed analysis of the law’s impact on jobs.

After obtaining coverage through the health law, some workers may forgo employment, while others may reduce hours, according to a report by the Congressional Budget Office. Low-wage workers are the most likely to drop out of the workforce as a result of the law, it said. The CBO said the law’s impact on jobs mostly would be felt after 2016.

This almost certainly underestimates the impact.   Why?  Well, one reason is that a lot of full-time jobs were switched to part-time jobs way back in late 2012.  That is what our company did.  Why so early?  Because according to rules in place at the time (rules that have since been delayed at least a year) the accounting period for who would be considered full-time for the purpose of ACA penalties would be determined by an accounting period that started January 1, 2013.  So, if a business wanted an employee to be considered part-time on January 1, 2014 (the original date employer sanctions were to begin), the changes to that employees hours had to be put in place in late 2012.  More on this here in Forbes.

In addition, this CBO report is  a static analysis of existing business.  It does not seem to include any provisions for businesses that have dialed back on investment and expansion in response to the ACA (we have certainly cut back our planned investments, and we can't be the only ones.)  This effect is suggested (but certainly not proven) by this chart.

click to enlarge

The sequester and government shutdown were cited by the Left as reasons for a sluggish economy.  Which government action seems most correlated with a flattening in job growth?

 

Health Care Lost Opportunities

One of the real frustrations I have with Obamacare is that I believe we were on the cusp of a revolution in health care costs and payment systems, which the PPACA will likely kill.  As more and more of us adopted high-deductible health insurance plans, there was an increasing transparency in pricing, and new delivery models were emerging to serve this consumer-based, non-third-party payer health niche.

I think this even more as I read about the CMS revising its future health care cost inflation numbers to take into account a flattening of medical price inflation that has been occurring over the last few years.  The Left has hilariously claimed credit for this cost reduction via some kind of time-travelling effect of not-yet-implemented PPACA measures.  But Charles Blahous reads the CMS report more carefully and finds that the PPACA has nothing to do with these inflation reductions, and in fact is if anything slowing the cost reduction progress.

The obvious point that leaps out from this graph is that the chief CMS actuary found that the ACA would increase national health expenditures through 2016. Not content to let the tables speak for themselves on this point, CMS was explicit in the text of its memorandum that the ACA increased the near-term cost projections:

“The estimated effects of the PPACA on overall national health expenditures (NHE) are shown in table 5. In aggregate, we estimate that for calendar years 2010 through 2019, NHE would increase by $311 billion or 0.9 percent, over the updated baseline projection that was released on June 29, 2009. Year by year, the relative increases are largest in 2016, when the coverage expansions would be fully phased in…The increase in total NHE is estimated to occur primarily as a net result of the substantial expansions in coverage under the PPACA…”

...CMS is now projecting slower health care expenditure growth than they were in 2009 and 2010. CMS’s current projection of 2016 health spending totaling 18.4% of GDP is 1 percentage point lower than its June 2009 estimate (19.4%) and 0.9 points lower than its February 2009 estimate (19.3%).

Why did CMS lower its estimates of future health spending? It wasn’t because of the ACA. We know this for a fact because CMS has released a memorandum detailing the reasons for changes in their ten-year outlook since April 2010. Here are the factors CMS cited, and the percentage of the improvement each was responsible for:

1) Medicare/Medicaid/other programs “unrelated to the ACA” (50.7% of improvement).

2) Other factors “unrelated to the ACA” (26.1%).

3) Updated data on historical spending growth (21.8%).

4) Updated macroeconomic assumptions (6.1%).

Now, that adds up to 104.7% of the total improvement. The reason these four factors add to more than 100% is that a fifth factor, the “impact of the ACA,” worked against the improvement. Per CMS, adjusting the April 2010 projections for the subsequent impact of the ACA shows it further increasing spending over ten years (equal to and opposite from 4.7% of the total change).

My Predicted Biggest Economic Story of 2013

Last year I predicted that the biggest economic story of 2013 would be the end of full-time work (due to Obamacare) in the retail service industry.  I seldom make predictions, but wrote that at the time because I was amazed that this shift to part time work was all we were talking about in the small business world, since for technical reasons in the law we had to have these changes in place in 2013, well before the 2014 start of the employer mandate.

The media world is finally catching up, particularly after recent jobs reports where the totality of net new job creation (and more) was in part time jobs.  Here is yet another story from the media finally noticing a business conversation that has been going on for almost a year:

Employers around the country, from fast-food franchises to colleges, have told NBC News that they will be cutting workers’ hours below 30 a week because they can’t afford to offer the health insurance mandated by the Affordable Care Act, also known as Obamacare.

“To tell somebody that you’ve got to decrease their hours because of a law passed in Washington is very frustrating to me,” said Loren Goodridge, who owns 21 Subway franchises, including a restaurant in Kennebunk. “I know the impact I’m having on some of my employees.”

Goodridge said he’s cutting the hours of 50 workers to no more than 29 a week so he won’t trigger the provision in the new health care law that requires employers to offer coverage to employees who work 30 hours or more per week. The provision takes effect in 16 months....

The White House dismisses such examples as "anecdotal." Jason Furman, chairman of the president’s Council of Economic Advisors, said, “We are seeing no systematic evidence that the Affordable Care Act is having an adverse impact on job growth or the number of hours employees are working. … [S]ince the ACA became law, nearly 90 percent of the gain in employment has been in full-time positions.”

But the president of an influential union that supports Obamacare said the White House is wrong.

"It IS happening," insisted Joseph Hansen, president of the United Food and Commercial Workers union, which has 1.2 million members.  "Wait a year. You'll see tremendous impact as workers have their hours reduced and their incomes reduced. The facts are already starting to show up. Their statistics, I think, are a little behind the time."

This has to be spin by the Obama Administration and not an honest belief.  There is no way they could have missed this:

In June, the household survey reported that part-time jobs soared by 360,000 to 28,059,000 – an all time record high. Full time jobs? Down 240,000.  And looking back at the entire year, so far in 2013, just 130K Full-Time Jobs have been added, offset by a whopping 557K Part-Time jobs.

I have written before that I think these changes are here to stay.  In some cases it is actually easier for businesses to stitch together full service coverage from part-time workers, as I discussed in this article at Forbes.

She Had Just the Resume They Were Looking For

Via ABC

The Internal Revenue Service official in charge of the tax-exempt organizations at the time when the unit targeted tea party groups now runs the IRS office responsible for the health care legislation.

Sarah Hall Ingram served as commissioner of the office responsible for tax-exempt organizations between 2009 and 2012. But Ingram has since left that part of the IRS and is now the director of the IRS’ Affordable Care Act office, the IRS confirmed to ABC News today.

What Obama most needed in the IRS ACA office was someone willing to ignore the clear language of the PPACA legislation and ram through IRS tax subsidies for insurance policies in the Federal (vs. state) exchanges -- subsidies that were purposefully and explicitly denied in the plain language of the law.

It's Time to End the ACA (No, a Different One)

No, not the Affordable Care Act, though we need to get rid of that, too.  In this case I am talking about the Arizona Commerce Authority.  This is one of those ubiquitous local / state "development" efforts that mainly consists of handing out corporate welfare to a few well-connected companies who threaten to leave or build their new plant somewhere else.

Dru Stevenson at the Privatization blog has been nice enough to invite me to blog from time to time over at his place, despite the fact that we do not always agree.  But we are in total agreement on this effort:

Even from a conservative, free-market perspective, government subsidies for businesses distort markets, foster monopolies, undermine competition, and reduce efficiency.  The same complaints that business advocates make about the welfare system apply to government programs to help businesses - the vicious cycle of dependence, the lack of incentive to work hard or face difficult choices, the inevitable favoritism (some businesses get taxpayer subsidies, others miss out, and those that do have an unfair advantage over competitors who might otherwise win in a free marketplace).  It has a chilling effect on market-driven innovation, improvements in efficiency, or "creative destruction." The subsidies can cause inflation as the local market prices correct for the infusion of unearned money. The inherent risks in entrepreneurship get externalized onto taxpayers rather than internalized by those who hope to reap the profits if they get lucky.  The conflict-of-interest problem is not just that the businessmen will engage in whitewashed embezzlement, diverting funds to their own businesses or friend's businesses (or to their suppliers, in hopes of getting discounted inputs).

The problem is also that other firms - firms that might be more efficient, providing better goods and services at lower cost - face higher entry barriers when the existing holders of market share are bolstered by government handouts.  In other words, I see little difference in the morality of handouts for poor individuals/families and handouts for businesses.  There is a spiritual virtue in helping the poor, of course, but also a virtue in helping those who are hard-working and who have made sacrifices to become successful.  The problem for me is the unintended consequences of government subsidies for entities that are supposed to compete and succeed in a free market.

I encourage you to check it all out.

The reason this made his privatization blog is that Arizona has actually privatized this function to an independent business group.  Though an advocate of privatization in many realms, this makes me queasy for a couple of reasons:

  • I can't get excited about privatizing an activity that should not be occurring, or is, as Stevenson so ably explains, actually detrimental
  • I am comfortable privatizing operational things -- landscaping, running buildings, cleaning bathrooms, etc -- but privatizing the handing out of political patronage is an odd one for me and I don't really know how to think about it.  On the one hand, this is essentially what the PPACA (Obamacare, the other ACA) is doing with difficult decisions like determining which procedures should be on the must-cover list for insurers by putting them in the hands of independent groups.  But I have criticized those provisions of the PPACA for lack of accountability, and I believe the same arguments apply here

The only quibble I have with the criticism of the Arizona group is that, like many criticisms of privatization, it does not actually make a comparison to government-run efforts.  Sometimes even mistake-riddled private efforts can be better than disasterous public management.  For example this criticism:

According to Arizona PIRG's report, only two of the 13 incentive programs even track how many jobs or other benefits they generate -- and none disclose that information publicly. For all its business-savvy rhetoric, the ACA can't demonstrate performance if it doesn't track results. Only one program publicly discloses what companies promise to deliver for their subsidies. Worse still, only 4 of the 13 programs even disclose which companies received subsidies or how much. And when companies that receive subsidies fail to deliver on promised economic development benefits, the ACA can reclaim taxpayer subsidies for only one program, and there is no way for the public to see if this ever happens.

None of this is good, but note that for most similar state-run development programs, the number of programs that track their results is usually less than 2 in 13, the number is usually none.  And the fact that there is some sort of clawback provision on funds is better than exists in most state relocation and other subsidy programs.  In fact, most third-party reviews of state-run corporate relocation and plant location subsidy awards show that they universally fall well short of their pr0mised benefits, though this analysis is really hard to do because there is so little transparency in state activities of this sort.

My quibble, then, is that I am not sure the bad results here are a function of privatization or just the activity itself, as state-run efforts seem to do no better.

Update:  I have written before about government corporate subsidies and attempts at venture capital investment in the context of the "big shot" effect.  Many times I have come to suspect the biggest beneficiary of these programs is to the administrators themselves, who have no money of their own and wouldn't ever be trusted to manage a private portfolio but get to act as "big shots" with other peoples' money.  They get the psychic benefit of being little junior Donald Trumps.  This seems especially evident to me with Glendale, AZ, but seems to be an element of all these schemes.