Economic Report of the President 1994 - The American Presidency ...

Chart 4-9 Business Spending on Health InsuranceBusiness spending will increase slightly after reform but will fall below baseline by the endof the decade.Billions of dollars300 -Without Reform 303280 -260 -256240 -2 3 6 ^With Reform220 -218 ^ >200 -180 -180I I I1994 1995 1996 1997 1998 1999 2000Note: Business spending is for services and populations that will be in regional or corporate health alliances.Source: Administration estimates.IIllincrease by $20 billion to $30 billion, or about 0.6 percent of payroll.Although reform is unlikely to lead to a large reduction in thedemand for labor, it could affect the supply. Some individuals whowork mainly to obtain health insurance may voluntarily leave thelabor force after health reform is passed. Evidence from continuationof coverage (COBRA) laws passed by the Federal Governmentand many State governments suggests that the number of peopledeciding to retire is about 1 percent higher when they have the optionto purchase coverage through their former employer after retirement.These estimates must be raised to account for the lowerprice of insurance under reform; with this adjustment, it is estimatedthat about 350,000 to 600,000 additional people will be retiredas a result of the provisions in the Health Security Act.On the other hand, some welfare recipients are likely to decideto enter the labor force when health benefits become universal. Awelfare recipient currently receiving medicaid benefits who thentakes a job incurs a "tax" of two-thirds or more on earnings becauseof the resulting reduction in AFDC benefits, food stamps, and medicaidbenefits. Once health care is guaranteed universally, the loss165