CBO analysis suggests GOP “replacement” plan is politically unsustainable

The Congressional Budget Office (CBO) has issued its cost and coverage estimates for the House Republican Obamacare replacement legislation. CBO estimates that the bill would raise the number of people without health insurance by 24 million within a decade, but would trim $337 billion from the federal deficit over that time.

The report is here. This passage (at page 3) jumped out at me:

Starting in 2020, the increase in average premiums from repealing the individual mandate penalties would be more than offset by the combination of several factors that would decrease premiums. . . .

(Emphasis added)

I was also struck by the fact that the budgetary savings posited by the CBO are weighted heavily towards the period beginning in 2020.

Am I the only one who sees a political problem with front-loading health care reform legislation with pain — higher premiums — and backloading it with benefit — lower premiums and budgetary savings?

Actually, I’m not. Daniel Horowitz perceives the same problem and takes the concern one step further. He argues that the eventual benefits of the legislation, most notably the budget savings, will never accrue because the short-term pain will cause Republicans to lose their nerve:

It’s clear that by exacerbating the death spiral of the existing failed market before 2020, the political reality will ensure that even the minor reforms implemented to Medicaid and the exchange subsidies in 2020 will never occur. . . .

[P]icture the world of politics for the next three years. The insolvency will get even worse and it will all be blamed upon the repeal of Obamacare instead of Obamacare. Without the leverage of lower prices and a healed market, does anyone believe for a minute that Republicans will have the guts to go along with implementing subsequent Medicaid cuts, which are responsible for most of the budgetary savings? . . .

CBO does project that post 2020 premiums will go down by 10%, but we will never make it to that point. Again, the timeline is very important here. If this bill does not bring immediate relief, and in fact exacerbates the death spiral, the private market, along with GOP political capital, will be dead by 2020. The new regime will never be in place, especially not during the reelection [campaign] of President Trump.

It is worthwhile to note that the CBO is only making estimates or, perhaps more accurately, educated guesses. Moreover, the CBO was off in its prediction of the increase in the number of people who would be insured under Obamacare.

However, the CBO’s forecast was better than Republican critics admit. When CBO made its prediction, it could not know that the Supreme Court would allow states to opt out the Medicaid expansion. In addition, the CBO’s prediction apparently was more accurate than the competing predictions of four other forecasters.

My sense is that we can have reasonable confidence in the CBO’s predictions when it comes to trends, but not when it comes to numbers. As I argued above, if the CBO is right about the trends of the Republican proposal, the plan is probably too front-loaded with pain to accrue the benefits expected beginning in 2020.

And quite possibly, too front-loaded with pain to enable Republicans to maintain political power after that year.

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