How Accurate is the CBO?

 

No one gets too upset if weather forecasts are often wrong. Everyone realizes they’re just educated guesses. So why does the media think the Congressional Budget Office (CBO) is any better?

I recently received an email from a regular reader of this blog who expressed his concerns about the latest CBO predictions for the American Health Care Act (AHCA). Clearly he put a lot of faith in the CBO and the accuracy of its predictions. How accurate are those predictions?

Predictions v. Reality

The Wall Street Journal editorial board recently put this issue into perspective. On the same day that the CBO was releasing its latest predictions there were two reports of actual facts that were much more important yet were overlooked.

  • HHS released that average premiums in the individual market have increased 105% since 2013 – in the 39 states where ObamaCare exchanges are federally run.
  • BCBS of Kansas City withdrew its ObamaCare plans for 2018 from Kansas and Missouri. They cited losses of $100 million they called “unsustainable for our company.” That leaves 77 of Missouri’s 114 counties, including St. Louis, with one insurer and 25 counties with no coverage options. Premiums have increased 145% on average over four years.

 

These statistics are real and affect real Americans. They are not predictions from the CBO that may or may not happen. Yet these significant reports were completely overshadowed in the media by the predictions of the CBO.

The predictions of the CBO were actually encouraging on the whole. The CBO confirmed that the AHCA is a major fiscal dividend, which cuts taxes by $992 Billion, cuts spending by $1.1 Trillion, and lowers the federal deficit by $119 Billion over 10 years. When compared to an earlier version of the AHCA it will leave the number of insured “slightly higher” and the cost of premiums “slightly lower.”

These numbers were largely ignored by the media. They focused on the CBO prediction that said 14 million fewer people would be insured in 2018 relative to the ObamaCare status quo and this would rise to 23 million by 2026.

What do these numbers really mean?

Democrats have defined these predictions to mean that people will “lose coverage.” But that isn’t what the CBO predicted. They estimated that 14 million on Medicaid today would roll off the Medicaid program as it shifted to block grants – or a 17% drop in enrollment after the ObamaCare expansion. The intent here is to focus Medicaid on the poor and disabled, as it was originally intended, rather than on able-bodied, working–age adults.

The remaining people who would “lose coverage” (according to Democrats) would actually be people choosing to drop their coverage “because the penalty for not having insurance would be eliminated” in the words of the CBO. In other words, people would refuse to purchase insurance they didn’t want when the threat of a government tax is eliminated. ObamaCare insurance isn’t worth the price.

How accurate is the CBO?

This brings me back to the original question. The CBO has made many predictions about ObamaCare since its inception in 2010. Below is a graph that depicts the accuracy of these predictions:

 

Clearly the CBO has been overly optimistic when making ObamaCare predictions in the past. This raises the question of why they are being overly pessimistic about the AHCA – and whether or not they are truly non-partisan as advertised. In truth, the CBO is quite poor when trying to predict market-based reforms, such as the 2003 Medicare Part D drug benefit whose costs the CBO badly overestimated.

Are there errors in the CBO methodology that impact their predictions?

Seth Chandler, writing in Forbes, points out some significant errors. In March, 2016, the CBO predicted there would be 18 million enrolled in ObamaCare in 2018. Despite the actual numbers enrolled falling far short every year of their predictions (see graph above) the CBO used the same predictions in May, 2017, when they were projecting ObamaCare enrollment for 2018 through 2026. This assumption greatly influences the comparisons between the status quo (ObamaCare) and the proposed new legislation (AHCA).

In other words, the CBO is using faulty data about the number of insured today under ObamaCare to compare and project the number of insured under the AHCA. Despite the impending implosion of ObamaCare, with prices skyrocketing and insurers pulling out of the exchanges, they are assuming there will be eight million more insured next year than this year!

The old saying about computers is “garbage in – garbage out.” The same could be said of the CBO predictions predicated on 2018 ObamaCare enrollment projections that only the foolish would believe. Chandler explains:

“The problem is that the failure of the CBO to update its enrollment projections means that its enrollment projections for the ACA and its cost projections for the ACA, which depend on enrollment, are going to be wrong.”

Why does this matter?

The Wall Street Journal puts it this way:

“Headlines aside, the CBO report matters because it is the fiscal template for Senate negotiations and what policies can be included under the budget “reconciliation” procedure that requires 51 votes. But Senators shouldn’t allow the budget scorekeeper’s opinions about the future to dictate policy or political decisions. Incentives and private competition can produce better outcomes than CBO’s model foresees.”

 

We must focus on the real world facts that show ObamaCare has been a colossal failure in holding down prices and providing real improvement in healthcare outcomes. These are facts the CBO never saw coming.

Hospitals Capitalize on Alternative Medicine

 

Hospitals are selling their souls to the almighty dollar. At a time when their profits are soaring due to ObamaCare they are also cashing in on alternative medicine.

My father was a hospital administrator. I grew up listening to him talk about the purpose of a hospital and its commitment to the community to provide high quality, scientifically based medicine. Something has changed in recent years from that kind of commitment.

I have served as the chief of the medical staff and the president of the governing board of a hospital. During that tenure I can honestly say we would have never allowed the hospital to provide treatments that could not be backed by scientific reasoning. The reputation of the hospital in the community was too important. We closely guarded that reputation and turned down requests for hospital privileges from any physician that would sully that reputation.

Alternative Medicine

Today, even the most prestigious hospitals in America are offering Alternative Medicine treatments that have no basis in scientific understanding. These treatments include the following:

  • “Energy healing” for multiple sclerosis
  • Acupuncture for infertility
  • Homeopathic bee venom for arthritis and nerve pain
  • Reiki – to “unleash” a cosmic energy flow to heal naturally
  • Ayurveda – an ancient Indian practice

 

Jim Meyers, writing in Newsmax, says these treatments are being offered at highly esteemed institutions such as Yale, Johns Hopkins, and the University of Pennsylvania. He says a UCLA study found that more than 60 hospitals are now offering alternative-medicine programs – and business is booming. Alternative medicine is projected to rake in an eye-opening $37 Billion this year!

Here are some examples of prestigious medical facility offerings:

  • Thomas Jefferson University (Philadelphia) offers intravenous vitamin and mineral therapies as well as homeopathic bee venom.
  • The University of California, San Francisco, offers Chinese herbal medicine along with Ayurveda, a holistic approach, and has a class on “laughter yoga.”
  • The University of Pittsburgh’s integrative medical center offers unconventional treatments for ailments ranging from ADHD to whiplash.
  • The University of Florida held a public forum suggesting herbal therapy could help with Alzheimer’s disease.

 

Proponents of this practice argue that conventional medicine cannot cure everything. Critics say this practice undermines credibility for scientifically proven treatments.

STAT, a national medical news website, recently examined alternative medicine practices at 15 academic research centers across the nation. They found “these therapies have become embedded in prestigious hospitals and medical schools.”

Doctors are pushing back against this trend, however. Dr. Irene Extores, medical director of the integrative medicine program at Florida, said: “The important thing about practicing in an academic center is that we must hold ourselves to certain standards.” The University of Pittsburgh acknowledges on its website that alternative therapies “generally have not been subjected to the same level of research as standard approaches.”

STAT makes a stronger statement. They say that alternative medical practices being promoted at major medical centers, “have little or no scientific backing.”

“We’ve become witch doctors,” protests Dr. Steven Novella, a professor of neurology at Yale School of Medicine and a fervent critic of alternative medicine. Novella told the STAT medical news website that by promoting alternative medicine, doctors are forfeiting “any claim that we had to being a science-based profession.” He also noted that when famous medical institutions offer a treatment, patients are less likely to question its validity, or whether techniques are based on scientific evidence. “They see a prestigious hospital is offering it, so they think it’s legitimate.”

There was a time when people had to go to Mexico or other countries to find such treatments because American hospitals refused to offer them. Today, it seems as long as there are consumers there will be hospitals selling this modern “snake oil.”

My father might turn over in his grave.

 

How Do Doctors Get Paid?

 

(Reprinted from an article written by Megan Lewis, M.D., a family physician in rural Colorado.)

 

Imagine going to your favorite restaurant. You are greeted at the door by the hostess, who seats you and takes your drink order. You order through your favorite waiter, Andrew, who recommends the special of the day: prime rib with a dinner salad and a chocolate torte for dessert. Soon after, the food is brought out and it is delicious! You have time to enjoy your food. You then receive the bill and pay for your meal, returning to your home satisfied, all your dining needs met. Let’s say, for simplicity’s sake, you paid $75 for this meal: $50 for the steak, $10 for the salad and $15 for the dessert.

A change then occurs in the restaurant industry. A new form of eating out has been adopted. Your favorite restaurant has now contracted with over 30 different “restaurant insurance companies.”

Anticipating another pleasant dining experience, you return to the restaurant with your new “subscribers card.” You pay your $5 “copay”. You sit in the foyer of the restaurant. You wait an hour, even though you made reservations. A harried Andrew greets you and quickly takes your order after you briefly glance at the menu. The food arrives at your table. As you take your second bite, Andrew informs you that “your time is up” and the table is reserved for another party. You are escorted outside with your hastily boxed left-overs.

What has happened to the restaurant? Behind the scenes, the restaurant owner has learned some tough realities of the “new system.” During the first month of taking insurance, the owner sends a form to the insurance company requesting payment for the $75 steak dinner: $50 for the steak, $10 for the salad and $15 for the torte. The contract with the insurance company already states that they will only pay $45 for the $50 steak, but the owner decides that the extra customers brought to the restaurant by contracting with this insurance company will more than offset this small loss.

The first attempt at collecting the $75 for the full meal is returned unpaid with the note that it was rejected due to a “coding error.” The forms for payment from the insurance company require the owner to list the parts of the meal, not by name, but by the numerical codes. The owner had listed the salad by the wrong numerical code. No suggestions for the correct code are offered, so the restaurant owner purchases a series of books, at a cost of $500, to learn how to assign the correct code to the different parts of the meals. These books will need to be bought annually due to the constant changing of the code numbers.

After 30 minutes of study, the owner realizes the dinner salad should be coded as a 723.13, not the 723.1 the owner originally put on the form. The salad, it turns out, needed to have two digits after the decimal point, indicating that it was a dinner salad, and not a “main course” salad, the owner mails the corrected form.

In response to the second request for payment, the insurance company does not send a check, but a detailed questionnaire: Was garlic used in seasoning the steak? Was it necessary to use garlic for this particular recipe? Did the restaurant ask for permission to use garlic from the insurance company before serving the steak? Why was salt, a less expensive alternative, not used instead? The owner submits the answers, emphasizing that the garlic is part of a secret family recipe that made the restaurant famous.

The owner waits another week (it has now been 3 weeks since the dinner was served). The check arrives three and a half weeks after the meal was served. The check is for $20 and states that it is specifically for the steak. The check also comes with a letter stating that no billing of the patron may occur for the salad, but no other explanation is enclosed. No mention is made of the $15 dessert.

The now frustrated restaurant owner calls the provider service number listed in the contract. After five separate phone calls to five different numbers (The harried voice behind phone call number four explains that the insurance company has merged with another insurance company and the phone numbers had all changed last week; sorry for the inconvenience . . . ), the owner gets to ask why, when the contract says the steak will be paid at $45, has the check only been written for $20? And what happened to the payment for the $10 salad and the $15 dessert?

As it turns out, this particular patron’s insurance contract only pays $45 when the patron has reached their deductible, which this patron has not paid at this time. The remaining portion of payment for the steak must now be billed by the restaurant to the patron directly. The $10 for the salad would have been paid if the patron had ordered it on a different day, but, per page 35 in the contract, because it was billed on the same day as the steak, it is considered to be part of the payment for the steak and no extra money can be collected form the patron or the insurance company. The dessert, the owner learns, should have had a “modifier” number put with its particular billing code when billed with the steak and the salad.

Realizing that the insurance billing is quite a bit harder than anticipated, the restaurant owner hires a company, who is paid 5% of any money collected to specifically make sure these coding errors do not occur again and follow up on payment rejections. For an additional $99 per month, the billing company will “scrub” the forms submitted for payment to make sure specific clerical errors will not cause future delays in the payment.

The owner must now lay off the hostess and the bus boy to pay the billing company, so these duties are now added to the waiter’s other responsibilities. In the meantime, the restaurant owner has also had the waiter take on the job of answering the phones due to the now high volume of phone calls from patrons questioning why they are receiving bills for meals they ate over two months ago, and why did their insurance company not pay for this portion of the meal? This extra work is now resulting in longer times patrons must wait to be seated, and grumblings from the waiters who “were not hired or trained to do this kind of work.”

The owner now realizes that, although the dinner originally cost $75 to make, only $25 has been paid. The remaining $30 billed to the patron is now in its third mailing, with the first two request for payment going unanswered by the patron. The restaurant owner realizes a collection agency must be employed in order to have any hope of receiving any portion of payment from the patron.

Each meal served now costs at least an additional $20 due to the added overhead of the billing company, coding books, and the collection agency. These added expenses have nothing to do with cooking food or providing any direct service to the restaurant’s customers. Service to the restaurant’s patrons has been compromised with these changes as well. The owner has now over-extended the waiter, who was an excellent waiter, but is now taking on the roles of host, phone answering and table bussing.

In order to even meet the costs of providing fine dining, the restaurant owner now must seat twice as many patrons in the same amount of time. What was once an outstanding business that focused on fine dining and customer service has now been turned into a business in the business of trying to get paid.

 

Alas, I wish this were a fictional tale, but it is not. The only fictional portion is that this is not your favorite restaurant but your favorite doctor’s office, which is responsible not for meeting your dining needs, but those of your health.