5 Takeaways from the CBO Analysis

Yogi was right: It's tough to make predictions

Last week, the Congressional Budget Office (CBO) released its costs and coverage estimates for the American Health Care Act, the House Republican proposal for the repeal and replacement of the Affordable Care Act.  The “headline” numbers are that the proposed legislation will reduce the budget deficit by $337 billion over the next ten years but that more than 24 million people will “lose” health insurance coverage by 2026.  To navigate the talking points and spin in the media, here are several takeaways for conservatives about the CBO analysis:
 
1. Remember Yogi.  The notable baseball catcher and philosopher Yogi Berra once noted that it is tough to make predictions, especially about the future.  Most people realize that predictions about complex economic developments are especially difficult.  The world economy recently experienced the greatest financial and economic crisis since the 1930s.  With perhaps a few exceptions, none of the experts in economic forecasting saw it coming.  The CBO’s January 2007 Budget and Economic Outlook for 2008-2017, for example, projected continued and uninterrupted economic growth for the U.S. economy and said that the budget would be balanced by 2012.  That is, to say the least, not even vaguely close to what actually happened.   By December of 2007, the country was in the midst of the Great Recession.  CBO was not alone.  Most everyone got it wrong.  But Yogi was right.  
 
2.  Previous CBO studies on Obamacare have been wildly wrong.   CBO’s predictions about various aspects of the Affordable Care Act have been seriously off the mark as well.  In March 2015, CBO projected that about 25 million Americans would be insured through policies purchased through the Obamacare exchanges by 2017.  The actual number is closer to 13 million. Pretty far off, to say the least.
 
The CBO in its report on the pending legislation itself recognizes that predictions are hard.  The report explains that its predictions depend upon responses to the legislation by a wide variety of different actors with the U.S. economy, including federal agencies, states, insurers, employers, individuals and doctors and hospitals.  And as the CBO itself notes, all of those responses are difficult to predict.  And all of them are likely to interact in ways that are equally difficult to predict.  And ten years is a long time.  
 
3.  “Opting” out of healthcare is not the same as “losing” it.  According to the CBO, the primary reason why fewer people will be covered in 2018 and subsequent years is the elimination of the ACA’s “mandate” that requires individuals to purchase insurance coverage or pay a penalty.  According to CBO, 5 or 6 million people will “lose” their insurance coverage by 2018 simply because they decide not to buy insurance and they are no longer required to do so.  Others may forego coverage because CBO estimates that premiums may increase to make coverage less affordable.  It is obviously hard to predict with any certainty what large numbers of independent actors might or might not do when faced with changed circumstances.  Indeed, one of the reasons given for the CBO’s fairly dramatic failure to model ACA exchange enrollment is that it has consistently overestimated the effect of the Obamacare mandate on individual decision-making.  
 
4.  No one – including the CBO – can accurately predict what happens with Medicaid.  Another reason offered by the CBO for the large reductions in insurance coverage that it projects over the ten year period are decisions by the some of the states that have expanded Medicaid coverage under ACA to “discontinue” that expanded coverage.  CBO also claims that some states which it thinks it knows now intend to expand Medicaid coverage might decide not to do so.  Needless to say, it may be quite difficult to make accurate predictions about what state governments across the country might do or not do over a ten year time horizon.  Elections happen frequently and, as we have seen quite recently, they are hard to figure.   
 
5.  Don’t blame the CBO – blame those using it for political purposes.  The CBO is required by its mandate to put out numbers.  They are probably wrong.  And they may be very wrong.  The CBO itself notes in its report that its projections about the ACA have been wrong, and in some cases wrong by quite a lot.  And it recognizes that it will probably get its new estimates wrong as well.  “Outcomes of the legislation could differ substantially from some of the estimates provided here.”  Report at 26.  CBO is likely right that some of the budget savings they project will be realized, and it may be likely as well that fewer people will have insurance coverage under the new law.  But the numbers, and even their order of magnitude, are really unknown and probably unknowable.  
 
In other words, it’s just a guess. 
 
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