Where can a conversation possibly go when someone tells you that a new health care reform plan is going to take health coverage away from 22 million people? With the Congressional Budget Office (CBO) backing that claim…surely that is a showstopper.
Not so fast.
Along with educated guesses that the housing market would never crash and that all children will be potty-trained by the age of three, CBO analysis has a robust history of making imperfect assumptions about human behavior.
Four key facts lurk behind the CBO estimate that 22 million people will lose insurance:
Thus, the CBO records these assumed future enrollees as “lost coverage.” The key point being – a large amount of these individuals were not yet covered, and if what’s past is prologue, were not headed toward coverage under Obamacare. And the number of people who decide not to enroll again because it is no longer mandated, speaks volumes about the quality and value of the coverage.
What is the CBO?
The Congressional Budget Office’s job is to “score” the impact of legislation, such as the new American Health Coverage Act proposed to replace the Obama Administration’s Affordable Care Act. It assesses legislation across a 10-year timeframe. The CBO is restricted by its scoring rules and relies upon certain assumptions like behavioral effects to quantify the impact of the legislation – economic and otherwise.
While the CBO was created by Congress to “provide objective, impartial information about budgetary and economic issues,” their analysis has not been flawless because their work requires educated assumptions of behavioral effects. (CBO.gov) In the case of healthcare reform, the two biggest assumptions underlying their projections are: 1.) How will Americans react to a mandate? and 2.) What will be the future behavior of states?
AEI scholar, James Capretta weighs in, saying:
” ‘I am a big fan of CBO in general, that doesn’t mean that they get everything right. In the healthcare arena I think they have done a couple things that are probably skewing the estimates.’
‘One is they are working off a very old baseline..from over a year ago. They’re assuming a lot more enrollment in Medicaid in the future than would occur, and also in the exchanges than would occur. Which makes the coverage numbers look worse than they really will be in actuality….’
‘Secondly, they believe really heavily in the individual mandate. I believe it does have some effect, but probably not as much as CBO thinks.’ ”
Three assumptions that require another look:
Scholar Avik Roy’s analysis, explained below, finds that these factors could mean CBO’s analysis is off by as much as 19 million people who would not actually be losing health coverage.
Roy states that the CBO has overestimated the number of people who will sign-up for coverage in the Obamacare exchanges, including in its March 2016 baseline assessment (in red below). His chart maps the projected vs. real enrollment.
So, Roy concludes, The March 2016 “baseline is off by 7 to 8 million in future exchange enrollment; hence, the impact of the AHCA is also off by the same amount.”
Those estimates are called into question because Obamacare supporters and the IRS have found the mandate does not have the behavioral impact assumed by the CBO.
“…Jonathan Gruber—one of the law’s most famous advocates—believes Obamacare’s individual mandate is having little effect. In a 2016 article for the New England Journal of Medicine, Gruber and two co-authors wrote, ‘When we assessed the mandate’s detailed provisions, which include income-based penalties for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law.’ (Emphasis added.)”
IRS data also shows that:
“The penalty has not motivated the vast majority of the uninsured to buy coverage. The IRS Commissioner earlier this year reported to Congress on the efficacy of the individual mandate for the 2015 tax year. Here’s what he reported:
Additional analysis, however, suggests that not as many new states will expand their Medicaid coverage because they continue to fear “exposing their taxpayers to significant and growing liabilities that the federal government may back away from over time.”
What does this mean?
Avik Roy concludes the first CBO estimate of AHCA impact on coverage could be off by up to 19 million due to a flawed baseline that overcounts state Medicaid expansions and the influence of a mandate. Nineteen million is not a small rounding error or slight difference in analysis when the headlines from the CBO’s assessment are that 22 or 23 million Americans could be negatively impacted.
Conclusions
Challenge
Check in with your elected officials and see how they explain the CBO projections.
Resources
Byline: Kristin Jackson is a middle-of-America native with a decade of experience working on policy in our nation’s capital. She serves as policy editor for The Policy Circle. For Kristin’s biography, click here.