CBO Score Doesn’t Tell the Full Story of Repeal and Replace

The Congressional Budget Office (CBO) on Monday issued a report on the predicted impacts of the House Republican legislation to repeal and replace Obamacare. Unsurprisingly it was a political Rorschach test – each side, with enough eye-squinting, could see what they wanted to see.

Democrats immediately seized on one number: That 24 million fewer people will have health insurance in 2026 under Republicans’ American Health Care Act (AHCA) than they would under Obamacare. Republicans meanwhile have focused on another number: That the AHCA would reduce deficits by $337 billion over the same time period.

Both of these numbers deserve additional scrutiny. On the coverage front, the CBO has a remarkably poor track record for predicting the market impacts of government policy changes, which calls into question the reality of their estimates. As Avik Roy explains in Forbes the CBO’s modeling has three big problems.

First, their enrollment guesses have been consistently high. In 2010 the CBO estimated that Obamacare would cover 21 million people in 2016, when the real number is stabilizing around 11 million. Since that’s the baseline used to measure the loss of coverage under the Republican’s plan, it’s off by at least 7 to 8 million, and potentially more. Second, the CBO “ascribes near-magical powers to the individual mandate.” Despite absolutely no evidence that the income-based penalties would impact coverage rates, the CBO scored repeal of the mandate as increasing the number of uninsured by 16 million. And third, Roy explains that the CBO’s score assumes that all states will expand Medicaid, a fiction that makes it appear that the House plan reduces coverage by another 3 million.

“You add all that up—7 million off on future exchange enrollment, around 9 million off on the individual mandate’s power, and 3 million off on future Medicaid expansions—the CBO’s estimate of the impact of the AHCA on coverage is off by 19 million, and that the real impact of the AHCA on coverage is negative 5 million,” Roy concludes.

To be clear, the goal should be creating a system that expands coverage, not reduces it. However, as Senate Majority Leader Mitch McConnell explains, those coverage gains need to come as people choose to purchase more affordable plans, not because they are mandated to purchase shoddy, expensive government-regulated plans.

“We are hoping to have a more vibrant market that will attract a greater number of people to actually be able to buy, at an affordable cost, insurance that actually makes sense of them rather than one prescribed by government,” McConnell told reporters.

And that brings us to the other enormous limitation of the CBO score – both the coverage gains and the deficit reduction understate reality because the AHCA does not represent the totality of the Republican approach to repeal-and-replace.

The disappointing fact is that there is only so far that Republicans can go in the AHCA because it’s being passed through a process calls reconciliation. That path allows them to pass a bill with a bare majority in the Senate—a necessity since Democrats are refusing to clean up the mess they’ve made—but comes with the caveat that it can only include items related to the budget. That means the heavy-duty policy work that will be needed to clear out the underbrush of Obamacare regulations and create a new, functioning market must be left until later.

As Megan McArdle writes for Bloomberg, that work will be harder than it should be because Democrats built a shoddy and unworkable policy structure out of the political equivalent of concrete:

Some forms of government policy are built of political concrete. Once done, they cannot be renovated, added to or even destroyed without immense cost; for that reason, they tend to go on much as they always have, for good or for ill.

By the time Obamacare came on the scene, America already had government programs that were propping up health care for almost everyone in the country: tax-subsidized employer-sponsored health insurance, Medicare, Medicaid, the VA. No one was willing to shoulder the cost of knocking those things down and designing a rational, well-built structure to take their place, so instead the administration threw up an annex next to the Medicaid edifice, and tore down the little remaining patch of ground that wasn’t government-subsidized, and threw up a new tower to hold its residents.

Republicans are working hard to do what Democrats did not – tear down the crumbling, government-supported structures and replace them with a strong new market-based foundation. Unfortunately the renovation must be done in phases, and unfortunately the CBO can only score individual parts rather than the whole of the plan. But let’s not allow either of those things distract us from the good and necessary work that’s being done.