Diary

The CBO's Healthcare Projections are Worthless

On May 24th, the Congressional Budget Office set off a firestorm with it’s scoring of the House’s AHCA. The Obamacare replacement (we won’t call it repeal for obvious reasons) was immediately characterized as kicking 23 million people off their insurance. Progressives everywhere set their hair ablaze and pronounced thousands would die as a result. Our stalwart media corrected these mis-charactizations and…just kidding.

We all know what happened. It’s now become absolute conventional wisdom that any and all Republican healthcare bills will result in over 20 million people losing insurance, people dying in the streets, and nuclear war.

Some of these estimates could be explained by future spending reductions to Medicaid, but even at it’s peak of cuts in 2026, the AHCA only trims little more than 12% off of Obamacare’s projected Medicaid spending. The AHCA and the BCRA both provide tax credits (subsidies) to continue to help those on the exchanges, much to the disapproval of conservatives. So who are the 23 million people (or 22 million for the BCRA) who the Republicans are looking to mercilessly snatch healthcare away from?

For the most part, they don’t exist.

While I’ve suspected and argued as much for months, not having access to the actual internal CBO data has made it difficult to prove. Fortunately, that’s no longer a problem. Economist Avik Roy has acquired previously unreleased CBO baselines that show exactly what is going on.

This week, I obtained from a congressional staffer the CBO’s estimates of the coverage impact of repealing the individual mandate, separate from the Senate bill’s other provisions. The estimate was built out of earlier work CBO did to model how repealing the mandate would affect the federal deficit. CBO projected then that repealing the mandate alone would lead to 15 million fewer insured U.S. residents in 2018, and 16 million fewer by 2026, though they did not publish those estimates.

16 million represents nearly three-fourths of the CBO’s estimate of the coverage difference between the GOP bills and Obamacare in 2026. That’s despite the fact that, as I noted in March, even Jonathan Gruber—one of Obamacare’s most famous advocates—believes Obamacare’s individual mandate is having little effect. In a 2016 article for the New England Journal of Medicine, Gruber and two co-authors wrote, “When we assessed the mandate’s detailed provisions, which include income-based penalties for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law.

What does all this mean? First, the repeal of the individual mandate accounts for 73% of all “lost coverage” (which is actually a voluntary decision, but I digress). No matter what the Republicans do, the CBO will assume 16 million less people will be insured because of the repeal of the mandate. Leaving in Obamacare taxes and subsidies (as Senator Graham has suggested) will have no impact. The CBO score is not going to improve. The Republicans are chasing a ghost.

Secondly, the estimate of losses under the mandate should not be taken at face value. The CBO makes many illogical assumptions along the way to get there. These include the idea that people will turn down subsidies, drop coverage they need, and in some cases even turn down nearly (or completely) free healthcare just because the government no longer requires coverage. It also assumes that most of the previous coverage gains were not because of subsidies or expanding Medicaid, but rather, because of the power of the mandate. All of this makes little sense in relation to the actual details of the provision, which include penalties so low as to do almost nothing to incentivize getting coverage.

We also have to take into account just how miserably the CBO has failed in their projections of the healthcare market place in the past. Originally, the CBO projected 24 million people would enroll in Obamacare as of 2017. The actual number today is 10.3 million. My five year old could of simply counted as high as she can and gotten closer. Of those 10.3 million who did enroll, there’s little evidence they joined out of fear of penalties. The CBO has repeatedly overestimated the impact of the individual mandate and even Johnathan Gruber admits as much.

The problems don’t stop there, with the CBO making perhaps an even more egregious misrepresentation. While enrollment in 2017 is just 10.3 million people, the CBO’s updated projections say that 18 million will enroll by 2018 with a peak of 19 million the next year. That projection is what they are using to compare to the AHCA, BCRA, and a full repeal. Yes, the CBO is scoring the Republican bill(s) against the assumption that Obamacare enrollment will go up nearly 100% in the next year. Possible? Hardly. Obamacare’s enrollment has actually been flat-lining for years. There is zero evidence nor logic to the idea that Obamacare will nearly double it’s participants by 2018. Yet, the CBO decided to use that as their baseline anyway. That factor alone should disqualify their analysis.

When you put all this together, the actual difference between the Republican bills and Obamacare is a few million at best. The CBO places completely unrealistic faith in the power of the individual mandate, even as they’ve been proven wrong by large margins every preceding year regarding it. At some point the obvious has to be stated. The CBO’s numbers on the healthcare market place are worthless and their baselines are so unrealistic as to provide no meaningful projections. It’s a testament to the intellectual dishonesty of our traditional media that almost none of them have bothered to address these issues. Instead we see these misleading reports parroted as fact.

While the CBO is technically “non-partisan,” that does not mean they should be exempted from criticism. Their history says that a healthy dose of skepticism is not just warranted but required.