Putting the CBO Score in Perspective

by John Hart

The Congressional Budget Office released its revised score of the American Health Care Act this week. The big “news” is the CBO is saying 23 million fewer people will be covered by 2026 than under the Affordable Care Act rather than 24 million, which was their previous estimate. In other words, modifications made to the bill to help ensure passage earlier this month will result in one million more people being covered.

This estimate is frustrating to policymakers because it’s a best guess that’s treated as absolute truth. In baseball terms, CBO is like a hitter that bats .350 but reporters cover as if it bats 1.000. CBO scores are well intentioned but often deeply flawed.

Here’s the critical point: the CBO tends to overestimate the government’s ability to control costs while underestimating the market’s ability to control costs.

Consider three examples:

  1. CBO overestimated Obamacare’s exchange enrollment numbers by about 120 percent. CBO predicted 22 million Americans would enter exchange plans yet only 10 million enrolled. They overestimated the government’s ability to coerce coverage through the individual mandate.
  2. CBO underestimated Obamacare’s impacts on private health insurers. CBO assumed private health insurers would be profitable under Obamacare but many lost money, leading to the death spiral congressional Republicans predicted. In this case, CBO again overestimated the government’s ability to control costs by telling insurers what to do.
  3. CBO underestimated the market’s ability to control costs within Medicare Part D, the prescription drug benefit. As the Manhattan Institute’s Paul Howard explained in 2013, “Competition and consumer choice help keep costs down … Medicare Part D has cost more than 30 percent less than initially projected by the Congressional Budget Office in 2004 — $304 billion compared with $449 billion.

CBO’s score doesn’t change the fact that Obamacare is collapsing and needs to be replaced. As the Wall Street Journal noted, the speculative CBO story overshadowed a more concrete story about Blue Cross and Blue Shield of Kansas City pulling out of the ACA exchange, a decision that will affect 67,000 people.

As reported in the Kansas City Star:

Danette Wilson, Blue KC’s president and CEO, said the company has lost more than $100 million total on its exchange plans since the Affordable Care Act rolled out in 2014.

“This is unsustainable for our company,” Wilson said. “We have a responsibility to our (customers) and the greater community to remain stable and secure, and the uncertain direction of this market is a barrier to our continued participation.”

This was the big news of the week. This isn’t guesswork. It affects real people’s lives.

For reformers, refuting CBO is a necessary but rear guard action. Reformers should continue to emphasize what they’re for and not merely highlight the ACA’s flaws or critique CBO’s guesswork, even though it’s necessary to do both.

This video from Avik Roy on the need to talk about what we’re for is a great resource. Reformers should unapologetically talk about how to create a system that provides great care for everyone. The best way to provide care for all isn’t to create a system centered on government but a system centered on you the individual.

 

 

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