The Corner

CBO Score of the Health Care Law and the Media

Whether it is in the New York Times or this morning on NPR, there seems to be a message emerging: After the SCOTUS ruling, the cost of the president’s signature health-care law is lower that previously projected. Here is the New York Times:

With the expected changes as a result of the court decision, the budget office said the law would cost $84 billion less than it had previously predicted.

“The insurance coverage provisions of the Affordable Care Act will have a net cost of $1.168 billion over the 2012-2022 period — compared with $1.252 billion projected in March 2012 for that 11-year period — for a net reduction of $84 billion,” or about 7 percent, the budget office said.

That’s not what the CBO is saying. The quote from the CBO refers to the estimate of a particular coverage provisions, not the law as a whole. Also, we ought to be careful when comparing CBO’s past and current projections since the ten year window isn’t the same. In reality my colleague Chuck Blahous explains today in an e21 piece called “Yet Another Fiscal Turn for the Worst: Understanding the CBO Re-Score of the 2010 Health Care Law,” the total outlay increase under the law, and the net deficit impact look worse than under the previous estimate.

CBO’s Latest Score, Under the Standard Scorekeeping Convention, is Worse: CBO now finds that relative to the baseline the health law reduces deficits by $109 billion over ten years: less than the 2011 score of $123 billion. BUT – they aren’t the same ten years. CBO’s latest score covers 2013-22, whereas the previous score covers 2012-21. This matters because in the latest score 2022 is a particularly good year for the health care law – a positive $44 billion. Through 2021, the positive score is now only $65 billion. This is barely half as good as the $123 billion anticipated last year. . . .

The two scores are qualitatively similar. They both show the health law worsening the deficit in the middle of this decade and improving matters beyond. But it’s also clear that the budget impact of the law in the latter part of the window is now projected to be less favorable, even under this highly flattering scoring convention.

Blahous also talked about the scoring problems with the law and the illusions that they create. However, the CBO reports also makes several points very clearly. Blahous explains:

Costs Per Person Have Gone Up: One thing there is no disagreement about is that costs per person under the law have gone up, as I predicted in my last article.

Compared with CBO’s 2011 projections for 2021, CBO now projects that 3 million fewer people will have coverage under the law (a coverage expansion of 30 million rather than 33 million). This is in large part because it now sees 11 million being covered under Medicaid (as opposed to the 18 million projected last year). Some of this reduced Medicaid participation would be made up by greater participation in the exchanges (25 million, vs. last year’s projection of 23 million).

I do not recommend that lawmakers make the number of covered individuals the sole criterion by which the success of reform is measured; doing so only leads to higher federal costs. Nevertheless, for the law to now be expected to cover fewer people while having a worsened financial impact is clearly bad news.

There is much more data and analysis here.

Incidentally, Blahous and Mercatus scholar Jason Fichtner have a chapter in a new book called The 4% Solution: Unleashing the Economic Growth America Needs. Like most of the authors in the book, Blahous and Fichtner admit that 4 percent growth is more of an aspiration than a readily achievable goal. However, with that goal in mind, they outline ways to reform Social Security to encourage labor-force participation and increase savings and investments to provide capital stock to growth the economy. For instance, they would reform the retirement earnings test, raise the retirement age, and change the benefit formula that currently creates a disincentive to working into your 60s.

There are other very interesting chapters (four of them are written by Noble Prize winners in economics) in the book, including “More Time on the Job,” by Edward Prescott, “At Home with the Great Recession,” by Steven Gjerstad and Vernon Smith, and “Spending, Taxes, and Certainty,” by Kevin Hassett.

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

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