CMS report shows CBO was wildly off base in Obamacare estimates

Someday, when an in-depth history of the Obamacare law is written, an entire chapter will be devoted to the Congressional Budget Office estimates over the years that have had such a huge impact on the nation's health care system.

The Centers for Medicare and Medicaid Services issued a report on health care spending and, in a footnote at the end of the document, estimated the impact of the elimination of the individual mandate from Obamacare.  The CBO estimated that a whopping 14 million people would lose coverage.  But CMS discovered that estimate to be wildly off base.  The real number is closer to 2.5 million. 

This has been a pattern by CBO since the law was being debated a decade ago.  In fact, their estimates on the number of people who would purchase insurance as a result of the mandate were used by policymakers in determining that the mandate was vitally necessary to the success or failure of Obamacare — estimates that convinced Barack Obama to insist on including it in the final version of the legislation.

Those faulty estimates continue to have an impact today.

Washington Examiner:

Over time, as Obamacare was implemented, experts began to question the importance of the mandate.  But when Republicans sought to repeal and replace Obamacare in 2017, the CBO did not adjust its assumptions about its power.  For instance, in one version of the House bill, the CBO found that before any cuts to actual spending went into effect, 14 million fewer people would be insured and that, "Most of the reductions in coverage ... would stem from repealing the penalties associated with the individual mandate."  Incredibly, the CBO estimated that 5 million fewer people would enroll in free Medicaid mainly due to the elimination of the penalties.  This number accounted for more than half of the 24 million the CBO said the Republican plan would reduce coverage for overall over a decade.

While any CBO analysis of the Republican bills was likely to project large coverage losses due to the cuts to Medicaid and subsidies, if CBO had more realistic assumptions about the mandate, the numbers would have been significantly smaller, and perhaps left more room to convince centrist Republicans to get on board.

On the flip side, the CBO's wild assumptions about the mandate benefited the GOP when it came to passing the tax law in 2017.  Then, the CBO estimated eliminating the penalties would mean 4 million fewer people having coverage in 2019, and 13 million fewer overall.  The CBO said this would save $338 billion, mainly due to lower spending on Medicaid and insurance subsidies, giving Republicans more paper savings to work with to provide a more substantial tax cut and secure final passage.

Both sides use the CBO's estimates in debating legislation.  For the individual mandate, the CBO's assumptions should have been adjusted after it became clear how wrong the office was to begin with:

But the CMS actuaries, while acknowledging that the elimination of the mandate penalties would have some effect on enrollment in private coverage, write in footnote #2 toward the bottom of their report on national health projections, "By 2019 the individual mandate repeal is anticipated to result in about 1.5 million fewer direct-purchase-market enrollees, who are expected to be somewhat younger and healthier than those who retain coverage, as well as about 1.0 million fewer employer-sponsored-insurance-market enrollees, than otherwise would have been projected.  After 2019 the enrollment effects are expected to be smaller. Medicaid enrollment is assumed to be unaffected."

I can't think of a single government program where spending projections have come anywhere close to reality.  But Congress pretends the experts at the CBO have the answers they're looking for and uses them to pass or defeat legislation that impacts all of us.

There's no doubt that Congress needs this information and, in Congress's defense, the CBO uses well established government accounting procedures in making its estimates.  But perhaps it's time for Congress to rely less on the CBO and more on its own common sense and powers of reason.  There were many who questioned the CBO estimates at the time, but they were ignored. 

We're paying the price to this day.

Someday, when an in-depth history of the Obamacare law is written, an entire chapter will be devoted to the Congressional Budget Office estimates over the years that have had such a huge impact on the nation's health care system.

The Centers for Medicare and Medicaid Services issued a report on health care spending and, in a footnote at the end of the document, estimated the impact of the elimination of the individual mandate from Obamacare.  The CBO estimated that a whopping 14 million people would lose coverage.  But CMS discovered that estimate to be wildly off base.  The real number is closer to 2.5 million. 

This has been a pattern by CBO since the law was being debated a decade ago.  In fact, their estimates on the number of people who would purchase insurance as a result of the mandate were used by policymakers in determining that the mandate was vitally necessary to the success or failure of Obamacare — estimates that convinced Barack Obama to insist on including it in the final version of the legislation.

Those faulty estimates continue to have an impact today.

Washington Examiner:

Over time, as Obamacare was implemented, experts began to question the importance of the mandate.  But when Republicans sought to repeal and replace Obamacare in 2017, the CBO did not adjust its assumptions about its power.  For instance, in one version of the House bill, the CBO found that before any cuts to actual spending went into effect, 14 million fewer people would be insured and that, "Most of the reductions in coverage ... would stem from repealing the penalties associated with the individual mandate."  Incredibly, the CBO estimated that 5 million fewer people would enroll in free Medicaid mainly due to the elimination of the penalties.  This number accounted for more than half of the 24 million the CBO said the Republican plan would reduce coverage for overall over a decade.

While any CBO analysis of the Republican bills was likely to project large coverage losses due to the cuts to Medicaid and subsidies, if CBO had more realistic assumptions about the mandate, the numbers would have been significantly smaller, and perhaps left more room to convince centrist Republicans to get on board.

On the flip side, the CBO's wild assumptions about the mandate benefited the GOP when it came to passing the tax law in 2017.  Then, the CBO estimated eliminating the penalties would mean 4 million fewer people having coverage in 2019, and 13 million fewer overall.  The CBO said this would save $338 billion, mainly due to lower spending on Medicaid and insurance subsidies, giving Republicans more paper savings to work with to provide a more substantial tax cut and secure final passage.

Both sides use the CBO's estimates in debating legislation.  For the individual mandate, the CBO's assumptions should have been adjusted after it became clear how wrong the office was to begin with:

But the CMS actuaries, while acknowledging that the elimination of the mandate penalties would have some effect on enrollment in private coverage, write in footnote #2 toward the bottom of their report on national health projections, "By 2019 the individual mandate repeal is anticipated to result in about 1.5 million fewer direct-purchase-market enrollees, who are expected to be somewhat younger and healthier than those who retain coverage, as well as about 1.0 million fewer employer-sponsored-insurance-market enrollees, than otherwise would have been projected.  After 2019 the enrollment effects are expected to be smaller. Medicaid enrollment is assumed to be unaffected."

I can't think of a single government program where spending projections have come anywhere close to reality.  But Congress pretends the experts at the CBO have the answers they're looking for and uses them to pass or defeat legislation that impacts all of us.

There's no doubt that Congress needs this information and, in Congress's defense, the CBO uses well established government accounting procedures in making its estimates.  But perhaps it's time for Congress to rely less on the CBO and more on its own common sense and powers of reason.  There were many who questioned the CBO estimates at the time, but they were ignored. 

We're paying the price to this day.