The Corner

Chuck Blahous Was Right About The ACA

When policies are debated in Washington, people make an endless number of projections about how they’ll go, and especially about how much they’ll cost. But we very rarely turn around to check if the prognosticators were right or not.

That’s why I am so glad that my colleague Chuck Blahous went back and looked at what people were saying about the ACA and how things turned out. For instance, Blahous reminds us that the White House claimed that the law wouldn’t add to the deficit and that, in fact, it would shrink it:

Advocates’ claim: “According to the official Administration and Congressional scorekeepers, the Affordable Care Act will reduce the deficit: its costs are more than fully paid for.” (White House Blog)

He disagreed; the ACA would add to the deficit:

What I predicted: “The Affordable Care Act (ACA) enacted in 2010 will significantly worsen the federal government’s fiscal position relative to previous law. . . . These adverse fiscal effects are not everywhere understood because of widely circulated analyses referencing scoring conventions of the Congressional Budget Office (CBO) . . . which compare the health care reform legislation to a baseline scenario that differs from actual law.” . . .

What has happened: Two months after my study was published, CBO’s next long-term budget outlook clarified explicitly that I was correct: CBO’s baseline comparison that appeared to show the ACA reducing the deficit did not reflect how it changed actual law: “Projections in this report are consistent with a statutory requirement that CBO, in its baseline projections, assume that benefit payments will continue to be made after trust funds have been exhausted, even if there is no legal authority to make such payments.”

And Blahous’s predictions about the ACA did materialize. For instance, he argued that many of the ACA’s savings would not occur:

Advocates’ claims: “$750 billion in reliable revenues and savings . . . $145 billion saved . . . by phasing out overpayments to . . . Medicare Advantage . . . $69 billion in penalties paid by employers and individuals who choose not to purchase insurance . . . $32 billion raised by taxing very expensive (“Cadillac”) health insurance policies . . . The numbers on this list do not represent ‘hoped-for’ savings . . . These are firm estimates that CBO was able to ‘score’ with some confidence, based on known facts and solid historical data.” (Maggie Mahar, Century Foundation)

What has happened: The employer and individual mandates have not been enforced and there is mounting pressure for repeal. Planned Medicare Advantage cuts have been scaled back. The Cadillac plan tax has not yet taken effect and labor unions are mobilizing against its implementation.

He also predicted that, whether or not Mitt Romney became president, not all states would agree to expand Medicaid. He was right. He also predicted that the cost for states of expanding Medicaid would be much larger than what was announced because, among other reasons, of the woodwork effect (basically people enrolling for Medicaid now who were previously eligible and hence not covered under the ACA’s new formula). He was right about that, too, and other things besides.

He concludes:

In any event, the first years of ACA implementation have unfolded essentially as I anticipated in my 2012 and 2013 studies. The point is not that I am omniscient or that I have a special gift for anticipating unknowable outcomes. Rather, these statements resulted from straightforward, common-sense analysis of easily predictable effects.

While we cannot erase past policy mistakes, going forward we should make better use of predictive information widely available to lawmakers, press and public, than was done in the case of the ACA.

I agree with him that our repeated experience that government programs never work as well as we’re told and never cost as little as we’re told should teach us to be skeptical of rosy predictions. However, I won’t be holding my breath.

The whole thing is here.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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