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ObamaCare: 1 Million from Work to Welfare

A new study suggests President Obama’s Affordable Care Act might have yet another huge and negative unintended consequence: if low-income adults can get health insurance through Obamacare’s Medicaid expansion, they are less likely to try and get a job — or keep a job. As Public Health Insurance, Labor Supply, and Employment Lock by Craig Garthwaite, Tal Gross, and Matthew J. Notowidigdo puts it:

Our results suggest a significant degree of “employment lock” – workers employed primarily in order to secure private health insurance coverage. The results also suggest that the Affordable Care Act – which similarly affects adults not traditionally eligible for public health insurance – may cause large reductions in the labor supply of low-income adults. … One must exercise considerable caution when directly applying our results to the ACA, but our results appear to indicate that the soon-to-be-enacted health care reform may cause substantial declines in aggregate employment.

How substantial might the shift from work to welfare be?

Using CPS data, we estimate that between 840,000 and 1.5 million childless adults in the US currently earn less than 200 percent of the poverty line, have employer-provided insurance, and are not eligible for public health insurance.

Applying our labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance. This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.

And the other big finding here is Obamacare could cause an even bigger and costlier move into Medicaid than current forecasts:

Our results suggest a far larger increase in Medicaid enrollments from the ACA than is currently estimated. In 2011, approximately 8.9 million Americans with incomes below 139 percent of the poverty line were covered by employer-provided health insurance. If all states implement the Medicaid expansion, our estimates suggest that approximately 4.2 million of these privately insured individuals will move into public coverage.

To place this number in perspective, the Congressional Budget Office estimated that if all states implemented the ACA Medicaid expansion, there would be 16 million additional Medicaid enrollees. In an earlier analysis, the CBO estimated that only 10 percent of the new Medicaid enrollees will previously have had private coverage. Our results suggest much larger crowdout among childless adults, which may result in a 16 percent increase in public health insurance enrollees under the ACA.

The researchers arrive at these numbers by examining the labor market impact of Tennessee’s 2005 decision to discontinue its expansion of TennCare, the state’s Medicaid system. They found that the TennCare disenrollment caused “a large and immediate labor supply increase” as folks who lost coverage starting looking for work. More:

Indeed, we find a similarly large increase in private health insurance following the disenrollment, suggesting that public health insurance had been “crowding out” private health insurance When we explore the dynamic effects of the disenrollment, we find an immediate increase in job search behavior and a steady rise in both employment and health insurance coverage. The pattern of changes in labor supply and the crowdout behavior suggest that disenrollees entered the labor market and gained employment in order to procure health insurance. This finding is consistent with both.

And Obamacare would cause the reverse effect, pushing those getting subsidized coverage to leave the labor force. The result is especially worrisome for the health of working America if you combine it with Obamacare’s possible nudge toward more part-time workers in place of full-time workers.

James Pethokoukis

James Pethokoukis is the Money & Politics columnist-blogger for the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews. Pethokoukis has written for many publications including USNews & World Report, The New York Times, The Weekly Standard, Commentary, USA Today, and Investor’s Business Daily.


  1. Jan October 2, 2013

    People who are out of work can get Medicaid, free of charge and with no deductibles. They do not NEED Obamacare, and they did not need it before. It’s when they go back to work, if and only if, they earn enough to have to pay the full premium, then they go on Obamacare. If not, some of them will still qualify for Medicaid, or at least for extra help with premium payments, etc.

  2. randy November 8, 2013


  3. sick of lies December 11, 2013

    citizens this false and forced law is nothing but a sheep gathering deal. if the sheperd do not have any sheep he stops being a sheperd. look at our broken government. in the past forty or so years look at what this nation has lost. manufacturing jobs, a decrease in education and the will of self responsibilities. king obama and his emps have been waiting for this moment for almost one hundred years. the last thing free and educated peoples have are choices of their own health. so now this unjust law is herding sheep back into their fold. keep them dependent upon the free government plans and the government can reach into everyones pockets on every level. how did not the surpreme court ( nine educated judges) not see this? they are part of the plan. remember they have life long jobs. if the idiot and congress did not read this mess. dod you think these educated nine did? this is simply taxation without representation and domestic treason on every level of the elected. our health is what God gave each of us. he did not give it to obama, pelosi, reid or the high court. yet they took control. they know best. my suggestion to this treason is for them to take a bullet,rope or life in prison. their choice. hitler took the shot, germany survives today. i ask will america survive tomorrow? hold them to account. oh, if the feds read this. remember you have family members that are losing freedoms also. i am not any mans sheep. i am a free thinking american citizen. i choose who i want to deal with my person mentally and in body. so to the new american kingship– kiss my ass. i will not be part of this sheep herding process. just show me the jail cell. your choice america. this is our valley forge, our alamo, our domestic pearl harbor how will you stand?

  4. cal December 29, 2013

    Excellent Post!
    I agree with you 100%!
    Obama is leading the sheep
    and this country to destruction!

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