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Subsidies from Obamacare destroy incentives to work

Americans want to help give a leg up to others who are willing to work and find the American Dream, but many remain frustrated that governmental programs may fail to understand human nature, and instead, create disincentives to work. Now we have evidence that subsidies under the Affordable Care Act are likely to do just that.

Subsidies could limit incentives for some

This Wednesday the Congressional Budget Office Director Douglas Elmendorf delivered stinging testimony to the first Joint Deficit Reduction Committee in a hearing on Capitol Hill in Washington. In his testimony, which was called “a damning assessment of the Affordable Care Act,” Elmendorf confirmed what Republicans have claimed for many months: Obamacare is likely to hurt the economy and create disincentives for millions of people to work.

Highly controversial report outlines work issues


According to the highly controversial report and subsequent testimony by CBO Director Douglas Elmendorf, there is evidence many workers may decide to cut back on their hours or drop from the job market completely due to benefits offered under the Obamacare healthcare act.

While some have argued the argument is nothing but smokescreens by Republicans in their efforts to derail the legislation, this nonpartisan group has said the numbers do not lie. According Elmendorf, "The act creates a disincentive for people to work.”

The testimony from Elmendorf also clarified that the decrease in employment would not necessarily be from employers who decide to cut hours or lay employees off, but rather from the employees, themselves, who choose not to work. The result could be a lower labor supply and decreased economic growth.

Lower income better off but other Americans will suffer


Elmendorf did note the subsidies may help the lower income. While critics argue gains could be offset for other Americans by the overall the expansion of the welfare state, the decrease in the incentive to work, and the increase in the size of the government.

How many people may quit work to get subsidies?


So what did the report conclude? Workers will decide to keep their income low- by quitting work or reducing their hours- so they can remain eligible for federal health care subsidies or Medicaid. The decrease in labor could, according to a recent FoxNews Report, “mean nationwide losses equal to 2.3 million full-time jobs by 2021.”

Proponents of Obamacare argued, however, that the reduction in work could be a good thing, allowing “people the freedom to retire early or spend more time as stay-at-home parents because they no longer had to depend only on their employers for health insurance.”

How do the subsidies work?


According to FoxNews, “Obamacare offers Medicaid to people earning up to 138 percent of the federal poverty line in states that opted into the program, and it provides subsidies to people earning above that amount, up to 400 percent of the federal poverty line.”

The CBO found that if a person’s income is more than 400% of the FPL or federal poverty line they are not eligible for “premium subsidies.” Note, if the worker crosses the threshold their government subsidies may be reduced to 0. What does this mean? Even if you are just $1 above the threshold you could pay from several thousand dollars to $20,000 more for insurance, depending on your age.
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