The CBO’s es­ti­mates are fake news

The Washington Post Sunday - - SUNDAY OPINION - BY MARC SHORT AND BRIAN BLASE Marc Short is as­sis­tant to the pres­i­dent for White House leg­isla­tive af­fairs. Brian Blase is spe­cial as­sis­tant to the pres­i­dent for the Na­tional Eco­nomic Coun­cil.

In the com­ing days, the Con­gres­sional Bud­get Of­fice will re­lease an up­dated analysis of the Se­nate bill to re­peal and re­place Oba­macare. The CBO will likely pre­dict lower health in­sur­ance cov­er­age rates if the bill be­comes law. The Amer­i­can peo­ple and Congress should give this pre­dic­tion lit­tle weight in as­sess­ing the bill’s merit.

The rea­son: The CBO’s method­ol­ogy, which fa­vors man­dates over choice and com­pe­ti­tion, is fun­da­men­tally flawed. As a re­sult, its past pre­dic­tions re­gard­ing health-care leg­is­la­tion have not borne much re­sem­blance to re­al­ity. Its pre­dic­tion about the Se­nate bill is un­likely to fare much bet­ter.

When Oba­macare passed in 2010, the CBO pro­jected a healthy in­di­vid­ual mar­ket with 23 mil­lion peo­ple en­rolled in ex­change plans by this year. The CBO pre­dicted that by 2017, ex­change plans would be prof­itable and an­nual pre­mium in­creases low.

The CBO reached these con­clu­sions, in large part, be­cause its model puts sig­nif­i­cant weight on the in­di­vid­ual man­date. The CBO ex­pected mil­lions of rel­a­tively young and healthy peo­ple to buy ex­change plans un­der gov­ern­ment co­er­cion.

But this never hap­pened. To­day, there are only 10 mil­lion peo­ple en­rolled in ex­change plans — about 60 per­cent fewer than ex­pected. (Con­trary to some claims, this is not be­cause more peo­ple have main­tained em­ployer plans than the CBO ex­pected; the re­duc­tion in em­ployer cov­er­age has been greater than the CBO pro­jected, and over­all about 9 mil­lion more peo­ple are unin­sured now than pro­jected.) Ab­sent the pro­jected bounty of young, healthy con­sumers, health in­sur­ers are aban­don­ing the ex­changes, leav­ing a third of Amer­i­can coun­ties with only one in­surer to choose from. As in­sur­ers con­tinue to flee the ex­changes, con­sumers will face even fewer op­tions next year.

And while choice is de­clin­ing, costs are sky­rock­et­ing. A re­cent analysis by the Depart­ment of Health and Hu­man Ser­vices found that the av­er­age an­nual pre­mium on the in­di­vid­ual mar­ket has more than dou­bled since 2013 — up nearly $3,000 in only four years. Pre­mi­ums seem set to in­crease at least 25 per­cent next year as well. These hikes, along with the large drop in in­surer par­tic­i­pa­tion, show that many state ex­changes are de­scend­ing deeper into ad­verse-selec­tion spi­rals.

The CBO failed to fore­see any of this. De­spite the ob­vi­ous short­com­ings of its pre­vi­ous analy­ses, the CBO has ut­terly failed to up­date its model to ac­count for re­al­ity. In­stead, the CBO con­tin­ues to at­tribute myth­i­cal power to the in­di­vid­ual man­date.

Two ex­am­ples clearly show the flaws. First, the CBO be­lieves that about 15 mil­lion peo­ple value their in­sur­ance so lit­tle that they will sim­ply drop cov­er­age next year fol­low­ing the re­peal of the in­di­vid­ual and em­ployer man­dates — an un­likely oc­cur­rence given the in­di­vid­ual man­date’s in­abil­ity to cause peo­ple to en­roll thus far. Fur­ther­more, this fig­ure in­cludes ap­prox­i­mately 4 mil­lion peo­ple on Med­i­caid, even though Med­i­caid en­rollees pay lit­tle or noth­ing for cov­er­age and are largely ex­empt from the penalty. It makes lit­tle sense for fewer in­di­vid­u­als to have Med­i­caid cov­er­age just from the re­peal of the in­di­vid­ual man­date, yet the CBO pre­dicts mil­lions of fewer Med­i­caid en­rollees.

Se­cond, the CBO es­ti­mates that the Oba­macare ex­changes will av­er­age 18 mil­lion en­rollees next year as­sum­ing the law re­mains in place. Yet only about 10 mil­lion Amer­i­cans had ex­change plans in 2015, 2016 and 2017 — and the CBO ig­nores Oba­macare’s col­lapse. Sim­ply put, the CBO pre­dicts cov­er­age un­der Oba­macare that will never ma­te­ri­al­ize.

The CBO’s be­lief in the power of the in­di­vid­ual man­date skews its pre­mium es­ti­mates as well. If the man­date ac­tu­ally com­pelled mil­lions of ad­di­tional healthy and young peo­ple into the mar­ket, as the CBO as­sumes, lower av­er­age pre­mi­ums would re­sult. But such con­sumers have largely steered clear of the law. By fail­ing to ac­count for this re­al­ity, the CBO’s es­ti­mate of any re­place­ment mea­sure as­sumes that con­sumers will leave a mar­ket they never joined in the first place — and cor­re­spond­ingly es­ti­mates higher pre­mi­ums than will ma­te­ri­al­ize.

Be­yond the in­di­vid­ual mar­ket, the CBO has also failed to prop­erly an­a­lyze Oba­macare’s Med­i­caid ex­pan­sion. For one, the Med­i­caid ex­pan­sion to work­ing-age, non-dis­abled adults has proved to be sub­stan­tially more ex­pen­sive than the CBO pro­jected — nearly 50 per­cent more ex­pen­sive per en­rollee.

The forth­com­ing analysis of the Se­nate bill will likely con­tain ad­di­tional pro­jec­tion er­rors. It will al­most cer­tainly as­sume that many ad­di­tional states would ex­pand Med­i­caid un­der Oba­macare, even though other agen­cies, such as the Of­fice of the Ac­tu­ary at the Cen­ters for Medi­care and Med­i­caid Ser­vices, have de­ter­mined this is highly un­likely. An as­sump­tion that states will ex­pand Med­i­caid means that the CBO will de­ter­mine that mil­lions of peo­ple will “lose” Med­i­caid cov­er­age un­der the Se­nate bill — but these peo­ple were never en­rolled in the first place.

The Amer­i­can peo­ple — and their rep­re­sen­ta­tives in Wash­ing­ton — de­serve the most ac­cu­rate as­sess­ment pos­si­ble of the ef­fects of crit­i­cal health-care leg­is­la­tion. Al­though the CBO gen­er­ally plays a valu­able role in the leg­isla­tive process, as Oba­macare’s on­go­ing fail­ure clearly demon­strates, the CBO’s health­care model is fun­da­men­tally flawed. The CBO’s fail­ure to up­date the model means its forth­com­ing analysis of the Se­nate bill will be no bet­ter — and per­haps worse — than its dis­proven Oba­macare pro­jec­tions. Al­though the me­dia and the po­lit­i­cal left will cer­tainly seize on it, the CBO’s es­ti­mates will be lit­tle more than fake news.


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