Politics & Policy

A Grain of Salt on CBO

(Reuters photo: Jim Young)

The Congressional Budget Office’s revised score for the revised American Health Care Act has been fodder for another round of alarmist headlines. But, as in March, the congressional scorekeeper’s projections merit a serious grain of salt.

The CBO estimates that the health-care legislation will result in 23 million fewer people having insurance in ten years, down from 24 million under the previous version. Once again, the salient finding is that many of these people will choose not to purchase health insurance once they are no longer compelled to do so, and, once again, these numbers rely on enrollment projections in the Obamacare exchanges that are wildly optimistic. There is no reason to believe, as the CBO does, that there will be around 18 million people enrolled in the exchanges by this time next year.

But the CBO’s Obamacare-related projections have always been suspiciously rosy. In 2010, the CBO projected that about 24 million would be on the Obamacare exchanges by 2017. In 2016, reality not having caught up to theory, they moved those projections down to 15 million. The actual number looks to be lower still: about 11 million.

That the CBO has been so far off, and for so long, should no longer come as a surprise. The CBO has repeatedly overestimated the effect that the individual mandate would have on insurance-coverage rates. At the same time, the CBO has underestimated the effect of incentives — e.g., the tax credits offered by the AHCA. With an eye to the current score, this is grounds for a deep breath. The CBO’s estimate of consumers who will forgo coverage is likely to be exaggerated: Consumers will be less responsive to the end of the individual mandate, and they will be more responsive to incentives offered in the new bill. Also, it’s likely that insurance companies will negotiate rates to be more attractive to consumers using tax credits — a contingency for which the CBO also does not plan.

The CBO also does not account for the effects that the states will have on coverage. The organization has no idea how many states will take up the waivers, how they will use them, and what the impact will be. That’s a significant lacuna.

So, what was true in March is still true: The CBO’s systematically biased model exercises far too much influence on the health-care reform process, and rather than trying to game the CBO, Republicans should be looking for ways to make health insurance more widely available and more affordable. Senate Republicans, currently working on their own health-care reform bill, could do a lot to that end — for example, by making tax credits more generous for those just above the Medicaid line and just below the Medicare age threshold, or by encouraging states to establish default enrollment plans.

The priority here should be good, sustainable policy. Democrats manipulated and massaged the Affordable Care Act to get the CBO’s stamp of approval in 2010, and look how that’s turned out.

The Editors — The Editors comprise the senior editorial staff of the National Review magazine and website.

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