The Corner

Politics & Policy

The CBO vs. the CMS on the AHCA

When the CBO released its score of the AHCA, Democrats seized on huge cuts to federal health-care spending and a massive increase in the number of uninsured. The White House pushed back, alleging that the CBO was politicized, and noting how far off the mark the CBO had so regularly been in the past.

This week we received a second opinion, that of the Centers for Medicare & Medicaid Services actuary (OACT) — which doubtless will give Democrats a turn to allege politicization and a bad track record. So, how different is the current estimate?

Well, on first inspection, there is a substantial difference. Where the CBO predicted that 23 million more Americans would be uninsured in 2026 under the AHCA than would be under the current law, OACT predicts that the number will be 13 million. Where the CBO predicts a $1,111 billion decline in federal spending over ten years, OACT predicts only a $328 billion decline.

Yet, looking at the details, there is a surprising amount of agreement. The projected costs of provisions relating to Medicare and the Patient and State Stability Fund are fairly similar. As are the projected changes in enrollment in employer-based health coverage.

The differences center on two specific areas, the individual market and Medicaid, and come down to assumptions about enrollment. The CBO estimates a much larger decline in enrollment in each (6 million rather than 2 million for the individual market; 14 million rather than 8 million for Medicaid), and therefore a larger reduction in associated spending ($276 billion rather than $160 billion for individual-market subsidies over ten years; $834 billion rather than $383 billion in Medicaid costs).

The disagreement on the individual market reflects uncertainty about the complex interaction of consumer risk aversion, price sensitivity, state regulations, the availability of substitutes such as employer coverage, and the degree to which risk pools are threatened by a death spiral in various states. It is very hard to predict the precise magnitude of shifts given our limited experience in this area and the vast number of moving parts. There is not much data to draw upon, so the two agencies end up with loosely educated guesses that are pretty far apart.

The projections for Medicaid are even less deterministic, as they depend enormously on estimates of how states will react politically to the reduction of federal matching funds for able-bodied adults from 90 percent to 50–75 percent (depending on the state). If you expect states to maintain the expansion of Medicaid eligibility to this group, then declines in spending and increases in the uninsured will both be much smaller. Ultimately this is a matter of political speculation, rather than a matter on which economic expertise and data shed much light. Again, both projections in this area should be seen as to a large extent driven by guesswork.

That said, the analyses by OACT and the CBO are both valuable, and are probably best understood as providing some sense of the broad magnitudes involved in various provisions of the AHCA, and the degrees of uncertainty attached to each. Where the numbers are similar, they are probably reasonably trustworthy. Where there is substantial disagreement, take the projections with a pinch of salt.