CBO Scoring of the ObamaCare Replacement

 

The Congressional Budget Office (CBO) recently released its report that analyzes the proposed ObamaCare replacement bill called The American Health Care Act (AHCA). The report draws the following conclusions:

  • The federal deficit will be reduced $337 Billion over the next ten years
    • Taxes will be cut $883 Billion
    • Spending will be cut $1.2 Trillion
  • Insurance premiums will initially rise and later decline
  • Insurance coverage will decline
    • 14 million less insured in 2018
    • 21 million less insured in 2020
    • 24 million less insured in 2026

 

The CBO is considered a non-partisan analyst of proposed new legislation. How valuable is the CBO scoring of the proposed AHCA?

The answer depends on your goals for the legislation.

Democrats believe the most important goal of healthcare legislation is the number of people with health insurance coverage. The Affordable Care Act (ObamaCare) increased the coverage of the uninsured by about 20 million, leaving about 30 million still uninsured. Even though ObamaCare fell far short of universal coverage, Democrats are proud to proclaim it a success since about 20 million Americans were added to the rolls of the insured.

In an earlier post (Misinformation in the ObamaCare Debate) I explained that having insurance coverage is not the same thing as having access to healthcare. If you can’t afford to use the insurance because of high deductibles you must pay before you receive care; or you have Medicaid and can’t find a doctor who will see you, you’re no better off with insurance. It’s like a man wandering in the desert who finds a free coupon to purchase bottled water – it does him no good if he can’t find the water!

Medicaid is so bad that the CBO report anticipates 5 million Americans currently enrolled in Medicaid will voluntarily drop their coverage when the government mandate to have insurance is removed! Remember, Medicaid is free!

But Democrats are satisfied to claim increased insurance coverage and will judge any replacement plan by the number of insured compared to ObamaCare. So for them, the CBO report that predicts 14 million fewer insured in 2018 rising to 24 million fewer insured by 2026 is proof that the AHCA is unacceptable. They would rather force people to have insurance coverage they don’t want – so they can brag about the number of insured and the government can control their healthcare.

For Republicans, the goal is containing costs and lowering the federal deficit while still providing good healthcare. ObamaCare failed both of these goals. To achieve these goals they believe the government needs to stop mandating coverage requirements and the purchase of healthcare insurance. They also believe in curtailing the exploding growth of Medicaid under ObamaCare.

Therefore, they are encouraged by the CBO report that predicts the federal deficit will decline $337 Billion over the next ten years. They are not alarmed by the predictions of more Americans uninsured because those predictions are based on expectations that many people will choose not to purchase healthcare insurance if the government mandates are lifted. Whether it is Medicaid, which is unacceptable, or private insurance that is unaffordable, many Americans will choose the freedom to be uninsured given the chance.

Accuracy of the CBO

Lest we put too much stock in the CBO report, it should be understood that the CBO has a terrible track record of making predictions about insurance coverage. In 2013 the CBO made predictions of future ObamaCare enrollment. Here’s a brief review of their record:

  • 2015 – predicted 13 million ObamaCare enrollees; actual – 11 million
  • 2016 – predicted 24 million ObamaCare enrollees: actual – 12 million
  • 2017 – predicted 26 million ObamaCare enrollees: actual – 10 million
  • As recently as March 2016 CBO predicted 15 million enrollees in 2017 but actual is 10 million.

 

The Wall Street Journal editorial board notes the CBO was also badly wrong about the 2003 Medicare prescription drug benefit (Part D) that was passed during the Bush administration. They failed to accurately weigh the incentives in the legislation and therefore over-estimated the costs. The drug benefit costs have been about 40% less over its first decade than CBO predicted.

The CBO is predicting premium prices will initially rise, but later fall. It is unlikely that insurance premiums will rise if the government mandates that drove them up are removed. ObamaCare forced insurers to sell only one type of policy – one that required all the “essential health benefits” they deemed necessary.

Furthermore, they were forced to sell them with artificial pricing, so-called community rating, which does not allow for accurate actuarial analysis. Instead of the usual six levels of pricing according to risk they were only allowed three. With a return to normal actuarial pricing and the freedom to design policies to meet the needs of their customers, insurance premiums are guaranteed to decline. When competition across state lines is added, prices should go even lower.

So the accuracy of the CBO predictions, especially regarding premium prices and insurance coverage, is suspect.

Since Republicans and Democrats do not agree on the primary goals of the legislation, they react differently to the CBO report. As a result, it will be difficult to gain bipartisan support. Republicans must achieve consensus in their own party on the most important goals and then compromise where possible with Democrats in hopes of gaining some support. Those Democrats who will be running for re-election to the Senate in 2018 should be looking for any reasonable excuse to support this Republican makeover of healthcare.

The CBO has been given too much credit in the past for predicting success of healthcare legislation. It should not be considered any more credible today.

Here’s how the WSJ editorial board sees it:

The smarter approach is to take CBO as merely one opinion about the future and point to others that are equally credible, and explain why. Above all, the GOP shouldn’t let budget scorekeepers dictate political judgments. They should thank the CBO for its opinions, have confidence that their ideas will work, and march ahead to fulfill their campaign promise to repeal and replace the failing Affordable Care Act.”

 

In the final analysis, the American people must decide whether they want the freedom to choose their own healthcare or government mandates that force them into the healthcare the government chooses. The Democrats tried the latter; Republicans were elected to provide the former.

No comments yet. You should be kind and add one!