This afternoon CBO released a working paper about how the agency estimates the effects of the Affordable Care Act (ACA) on the labor market. The ACA will make the labor supply, measured as the total compensation paid to workers, 0.86 percent smaller in 2025 than it would have been in the absence of that law, CBO estimates. Three-quarters of that decline will occur because of health insurance expansions, which raise effective tax rates on earnings from labor—for instance, by phasing out health insurance subsidies as people’s income rises—and thus reduce the amount of labor that workers choose to supply.
Today’s paper—part of a broad series of working papers providing technical information about our analyses—is just one way that CBO provides information about the methods and calculations underlying its estimates. CBO has long focused on the transparency of its analyses. We make a considerable effort to explain the basis of our findings so that Members of Congress, their staffs, and outside analysts can understand the results and question the methodologies used. Our cost estimates include descriptions of the basis for the estimates, and many of our reports provide substantial discussions of the relevant research literature and CBO's modeling approaches. Given the particular interest in our approaches to analyzing health care policy and to dynamic scoring, we have created two special collections of methodological materials on our website:
- We recently added a new page—Methods for Analyzing Health Insurance Coverage—to make it easier to find explanations of CBO's approaches to analyzing health insurance coverage and related proposals.
- Earlier this year—in light of the budget resolution’s requirement for CBO to incorporate the budgetary impact of macroeconomic effects into its 10-year cost estimates for certain legislation—we created a Dynamic Analysis page, which includes extensive explanations of our analytical methods to assess the economic effects of fiscal policies.
Going forward, we will continue to take steps to enhance the transparency of our analysis.
Keith Hall is CBO’s Director.