Are CBO Health Care Projections too Flawed to Matter?

[Jack Hays]

In the health care debate each new CBO report has been treated as unchallengeable fact. Is that really justified? And what if it's not?

The fundamental error in the CBO’s health-care projections


The agency attributes magical powers to Obamacare’s individual mandate.

• Marc Short, Brian Blase

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. . . .

 

[CriticalThought]

In the health care debate each new CBO report has been treated as unchallengeable fact. Is that really justified? And what if it's not?

The fundamental error in the CBO’s health-care projections


The agency attributes magical powers to Obamacare’s individual mandate.

• Marc Short, Brian Blase

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. . . .

I think people would take the right wing's sudden departure from the CBO more seriously if they didn't continue to cherry pick the parts they like from it.

Furthermore, nothing in the GOP bill will do anything to decrease premiums. They will just offer skinnier plans that cover less. That is like instead of selling 12 eggs for $12 they sell 6 eggs for $6 and call it a great deal.

 

[Jack Hays]

I think people would take the right wing's sudden departure from the CBO more seriously if they didn't continue to cherry pick the parts they like from it.

Furthermore, nothing in the GOP bill will do anything to decrease premiums. They will just offer skinnier plans that cover less. That is like instead of selling 12 eggs for $12 they sell 6 eggs for $6 and call it a great deal.

So what?

 

[CriticalThought]

So what?

The next time the CBO supports something you want, you will be praising it. The right wing has lost anything resembling a moral compass lately.

 

[ocean515]

In the health care debate each new CBO report has been treated as unchallengeable fact. Is that really justified? And what if it's not?

The fundamental error in the CBO’s health-care projections


The agency attributes magical powers to Obamacare’s individual mandate.

• Marc Short, Brian Blase

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.

Great post, as always.

The CBO has never been the end all to any legislation. It arose in the '70's out of a political fight between Nixon and Congress as a means to counter the projections of the OMB.

It's nothing more than a tool in any legislative process. Yet, it's become a highly politicized tool to be wielded when the circumstances are right.

It's reports on ACA were way off. As noted, it's assumptions were way off.

Yet, that history is to be ignored, if not buried, as it's latest analysis is paraded as the ultimate truth.

It's a two tone operation in a multi-color world.

 

[Jack Hays]

The next time the CBO supports something you want, you will be praising it. The right wing has lost anything resembling a moral compass lately.

Hmmm. I don't consider myself right wing, and there's no reason to praise or blame the CBO on a blanket basis anyway. On this specific issue the authors believe the CBO approach is flawed. If you find that discussion too much trouble then don't justify your indifference with a superficial put-down.

There is no reason at all why CBO work on some other issue would not be accurate and useful.

 

[code1211]

I think people would take the right wing's sudden departure from the CBO more seriously if they didn't continue to cherry pick the parts they like from it.

Furthermore, nothing in the GOP bill will do anything to decrease premiums. They will just offer skinnier plans that cover less. That is like instead of selling 12 eggs for $12 they sell 6 eggs for $6 and call it a great deal.

My question is: "Why are the Feds bent on mandating the coverage of things not needed by the purchasers?

As a 64 year old male in a committed relationship with an age appropriate woman, why do I need coverage for my abortion or Pre and post natal care.

Why does a 21 year old woman need coverage for Prostate Surgery?

IF the goal is assist those who cannot afford healthcare, THEN why not provide assistance for the people who cannot afford healthcare?

If the ACA was a stupid and wasteful contrivance, does the contrivance of another plan that is equally or more stupid and wasteful make the ACA a good thing?

I like Cruz's Plan (something I thought I would never say) as it provides the choices needed by most and maintains the safety net needed by some.

Under that plan, we would at least see who actually likes the ACA and views it as a value.

 

[Jack Hays]

My question is: "Why are the Feds bent on mandating the coverage of things not needed by the purchasers?

As a 64 year old male in a committed relationship with an age appropriate woman, why do I need coverage for my abortion or Pre and post natal care.

Why does a 21 year old woman need coverage for Prostate Surgery?

IF the goal is assist those who cannot afford healthcare, THEN why not provide assistance for the people who cannot afford healthcare?

If the ACA was a stupid and wasteful contrivance, does the contrivance of another plan that is equally or more stupid and wasteful make the ACA a good thing?

I like Cruz's Plan (something I thought I would never say) as it provides the choices needed by most and maintains the safety net needed by some.

Under that plan, we would at least see who actually likes the ACA and views it as a value.

I'm with you up to a point, but the essence of insurance is shared risk, so there's a point where everyone has to take on some share of the burden of protecting others. Determining where that point is would be the debatable issue.

 

[Gonzo Rodeo]

I think people would take the right wing's sudden departure from the CBO more seriously if they didn't continue to cherry pick the parts they like from it.

Furthermore, nothing in the GOP bill will do anything to decrease premiums. They will just offer skinnier plans that cover less. That is like instead of selling 12 eggs for $12 they sell 6 eggs for $6 and call it a great deal.

If my family doesn't get through 12 eggs before they start going bad, do you see how my family would not like a law mandating that eggs must be purchased by the dozen? Should my family be responsible for participating in and supporting the egg market so that people who do want or need a dozen eggs have easier access to a dozen eggs?

It's interesting that you made an anology with a consumer good. Because that is exactly what healthcare is. If I made any anology about the forced purchase of a consumer good, your instant reaction will be to say that "healthcare is different".... but it is not magically free from the effects of market forces.

 

[bubbabgone]

I think people would take the right wing's sudden departure from the CBO more seriously if they didn't continue to cherry pick the parts they like from it.

Furthermore, nothing in the GOP bill will do anything to decrease premiums. They will just offer skinnier plans that cover less. That is like instead of selling 12 eggs for $12 they sell 6 eggs for $6 and call it a great deal.

No No. The problems with the CBO are nothing new. It's been noted before. It's not a departure.
Now, the romance between the Democrat Party and Russia being off ... that's a departure.

 

[ttwtt78640]

I'm with you up to a point, but the essence of insurance is shared risk, so there's a point where everyone has to take on some share of the burden of protecting others. Determining where that point is would be the debatable issue.

Yep, but protecting them from what, exactly? We have wandered far away from the idea that basic insurance should address only the rare, unexpected and expensive events in life but exclude any (and all) routine (aka normal) maintenance costs. That is the case (so far) with other (auto, home and life) forms of insurance yet medical care insurance (under PPACA) has become more of a high end (more expensive) health maintenance plan with all of its added "no out of pocket cost" (aka included in all basic premiums) items.

Imagine what would happen to home insurance premium rates if all such policies were federally mandated to include "no out of pocket cost" for periodic repainting, replacement of worn out appliances and lawn care. Imagine what would happen to auto insurance premium rates if all such policies were federally mandated to include "no out of pocket cost" for periodic oil changes/tune-ups, worn tire replacement and car washes. The major problem is that PPACA turned all "basic" medical care insurance coverage into mandated membership in a high end HMO/PPO type plan which includes a middle man cut for every routine medical care procedure/device imaginable.

 

[Greenbeard]

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.

This is a dumb critique. If insurers in 2013 had set premiums closer to where the CBO predicted they would, that wouldn't have happened. Instead, insurers underpriced and had it to make it up in 2016-17 (which, not coincidentally, is when exchange business achieved profitability). In other words, the insurance industry would've been better off letting the CBO's bean counters set their premiums for them at the start.

I like Cruz's Plan (something I thought I would never say) as it provides the choices needed by most and maintains the safety net needed by some.

Under that plan, we would at least see who actually likes the ACA and views it as a value.

Literally everyone with knowledge of how health insurance works has denounced Cruz's amendment as a terrible idea that's unworkable: care providers, insurers, advocates, economists, you name it.

The American Academy of Actuaries even felt the need to put out an explainer on how risk pooling works to explain why this is a bad idea. It would almost be funny if this weren't real life.

 

[CriticalThought]

Hmmm. I don't consider myself right wing, and there's no reason to praise or blame the CBO on a blanket basis anyway. On this specific issue the authors believe the CBO approach is flawed. If you find that discussion too much trouble then don't justify your indifference with a superficial put-down.

There is no reason at all why CBO work on some other issue would not be accurate and useful.

The individual mandate never had the teeth to do what the CBO projected it would do. That said, ACA is more popular than ever, and contrary to the author's unsubstantiated assumptions, it is not collapsing. There is nothing to say that the CBO is any more or less accurate now, but the authors seem pretty sure that being less than accurate before makes any numbers now to be completely useless. I wouldn't be comfortable saying the CBO is correct, but if the authors were not motivated by a political bias, they would admit they were not comfortable asserting it is incorrect, especially without any other nonpartisan assessments to rely upon.

 

[Dittohead not!]

So what?

So the Trumpcare bill is a piece of crap legislation, and ignoring the CBO projections doesn't make it one scintilla better.

 

[CriticalThought]

No No. The problems with the CBO are nothing new. It's been noted before. It's not a departure.
Now, the romance between the Democrat Party and Russia being off ... that's a departure.

You mean like when Chelsea Clinton met with a Russian lawyer to collude on damaging information against Donald Trump that she believed came from the Russian government?

 

[joG]

I think people would take the right wing's sudden departure from the CBO more seriously if they didn't continue to cherry pick the parts they like from it.

Furthermore, nothing in the GOP bill will do anything to decrease premiums. They will just offer skinnier plans that cover less. That is like instead of selling 12 eggs for $12 they sell 6 eggs for $6 and call it a great deal.

So you think that the US should go on paying so much more per beneficiary and even increase per capita spending?

You dislike the US?

 

[CriticalThought]

So you think that the US should go on paying so much more per beneficiary and even increase per capita spending?

You dislike the US?

I think it is cute that you think capping Medicaid spending is going to cap healthcare costs. As if those who are no longer covered will suddenly stop breaking limbs or developing diseases or they will magically become wealthy enough to cover their own health care expenses as they arise.

 

[bubbabgone]

You mean like when Chelsea Clinton met with a Russian lawyer to collude on damaging information against Donald Trump that she believed came from the Russian government?

That was a non sequitur to everything and you don't really want to get into the Clintons and Russia connections, do you?

 

[CriticalThought]

That was a non sequitur to everything and you don't really want to get into the Clintons and Russia connections, do you?

I am not sure why you would bring up Russia in a healthcare thread unless you were looking for a red herring.

 

[Fenton Lum]

So what?

That is exactly the thinking of the "job creator" class, yes.

 

[Fenton Lum]

I think it is cute that you think capping Medicaid spending is going to cap healthcare costs. As if those who are no longer covered will suddenly stop breaking limbs or developing diseases or they will magically become wealthy enough to cover their own health care expenses as they arise.

The issue with our system is corporate control and predatory health insurance corporate middle persons in between patients and their doctors, THE most inefficient and wasteful system on the planet amongst advanced post indistrial nations. While other societies invest in their society, we extract and concentrate the wealth of ours into the hands of a privileged few.

 

[AlbqOwl]

In the health care debate each new CBO report has been treated as unchallengeable fact. Is that really justified? And what if it's not?

The fundamental error in the CBO’s health-care projections


The agency attributes magical powers to Obamacare’s individual mandate.

• Marc Short, Brian Blase

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.

****edited to accommodate allowed character count****

As the OP illustrates:

The fundamental flaw in the CBO is that it scores programs and proposals using only the facts and figures fed to it by those who want those programs or proposals scored. The CBO seems to do little thinking or research of its own.

The CBO rarely allows for variables that are inevitable in their equations--the devil is in the details and all that. It doesn't allow for changes in various behaviors that are prompted by the program/proposal. It doesn't look to history for guidance. It doesn't allow for changing culture or unforeseen developments nationally and worldwide that affect behavior or alter circumstances.

It strictly uses the information given to it. And therefore it is usually more wrong than right.

 

[Greenbeard]

The fundamental flaw in the CBO is that it scores programs and proposals using only the facts and figures fed to it by those who want those programs or proposals scored. The CBO seems to do little thinking or research of its own.

These GOP bills must be really terrible if these awful scores were produced using "only the fact and figures fed to it" by the GOP leadership.

 

[code1211]

This is a dumb critique. If insurers in 2013 had set premiums closer to where the CBO predicted they would, that wouldn't have happened. Instead, insurers underpriced and had it to make it up in 2016-17 (which, not coincidentally, is when exchange business achieved profitability). In other words, the insurance industry would've been better off letting the CBO's bean counters set their premiums for them at the start.



Literally everyone with knowledge of how health insurance works has denounced Cruz's amendment as a terrible idea that's unworkable: care providers, insurers, advocates, economists, you name it.

The American Academy of Actuaries even felt the need to put out an explainer on how risk pooling works to explain why this is a bad idea. It would almost be funny if this weren't real life.

I realize that risk pools are helpful when applied correctly. However, in socialized healthcare, which is what we are talking about, our current toe in the water approach is not working.

The goal of the ACA was to expand coverage to all citizens and thereby reduce costs by substantial amounts: $2500 per year if I remember correctly.

The outcome did not expand coverage to 100% but it did manage to increase the amount of the costs for the government, the premium costs to the policy holders, the losses to the insurance companies and the cost of the deductibles to the policy holders. It seems like we should have found at least one group that found an advantage in this.

That we managed to increase the cost in every corner of the process with no resulting advantage for any is really governmental.

Again, if the goal of the program is to provide healthcare to the uninsurable, then why are we not constructing a plan to provide healthcare to the uninsurable?

 

[AlbqOwl]

These GOP bills must be really terrible if these awful scores were produced using "only the fact and figures fed to it" by the GOP leadership.

Doesn't matter which party is feeding proposals to the CBO. Obamacare was fed to it and received a favorable score that turned out to be almost 100% wrong in every category. The GOP proposal receives an unfavorable score because it doesn't allow for the variables or changes in behavior/choices/options/opportunity envisioned by the GOP. Thus the CBO score is most likely going to be wrong there too, but it could be wrong in that it gives a less favorable score than what the reality will be.

The point is, that the CBO doesn't do economics. It does math. And the two are not always in agreement when it comes to reality.