The CBO’s Analysis of the GOP’s Health Care Bill Is Worthless

Yesterday the Congressional Budget Office released an analysis of the current version of the House health care bill that was trumpeted by Democrats because it projected that 23 million people would “lose” their health insurance if the law went into effect. However, as Guy Benson points out, this claim is false, since “the large bulk of those who are said to be ‘losing’ coverage do not currently have coverage.” Further, to the extent that some who currently are forced to buy health insurance by Obamacare decide it isn’t worth the cost to them, and choose not to purchase it, that is rightfully their decision.

Then, too, there is the fact that the CBO’s predictions about Obamacare have been ridiculously bad, as illustrated by this graphic:

Why should we believe an agency on a topic where its past projections have been wildly off the mark?

There is another, more subtle reason why the CBO’s analysis is worthless. As far as I know, it has been pointed out only by my colleague at Center of the American Experiment Peter Nelson, one of the country’s top health care experts. Peter points out that the CBO has uncritically relied on articles by a former Obama administration official who apparently failed to read the GOP bill and existing regulations carefully. Peter writes:

[T]he CBO appears to have relied on a couple of articles posted on the Brookings Institution website to analyze the impact of allowing states to waive certain Obamacare regulations. The articles were written by Matt Fiedler, former Chief Economist of the Council of Economic Advisers in the Obama Whitehouse. One article focused on how waiving the essential health benefit (EHB) requirement could impact protections against catastrophic losses for people enrolled in large employer plans. The other article assessed how waiving community rating regulations—the regs that restrict insurers from pricing premiums based on health status—for people who failed to maintain continuous coverage would impact individual insurance markets.

The Brookings analysis of the EHB waiver is flat out wrong and Fiedler’s analysis on waiving community rating, to say the least, exaggerates the possibilities. Nonetheless, the CBO touts the same two positions without any qualification.

Here’s what the CBO says about how a state waiving EHBs could lower protections against catastrophic losses:

For the large-group market, which generally consists of employers with more than 50 employees, current regulations allow employers to choose the EHB benchmark plan of any state in which they operate. Because of those regulations, a large employer operating in multiple states, including one that elected an EHB waiver, could base all of the plans it offers on the EHB requirements in a state with the waiver. That decision could allow annual and lifetime limits on benefits not included in the state’s EHBs.

Wrong. If a state chose to specify its own EHBs under a waiver, that choice would not be available to a large employer under current regulations. Presently, a state may choose an EHB from among a set of benchmark plans. While this gives states a choice, it also sets a minimum standard for the federal EHB across the country. Also under current regulations, for the purposes of the annual and lifetime dollar limit restrictions, a large employer may choose from among “one of the base-benchmark plans selected by a State.” Nothing in the regulations suggests an employer could choose from anything but a benchmark plan. Thus, an employer could not choose from an EHB specified by a state under a waiver. It would not be a benchmark plan.

The second issue, relating to state waivers of community rating, is more complicated and is hard to excerpt. You should read it all, but here is the key conclusion:

This scenario the CBO imagines for one-sixth of the population is, well, preposterous. At its core, the CBO believes that a state waiving community rating will allow healthy people to choose from one of two insurance pools, the community rated pool and the underwritten pool. Given the freedom, a healthy person will always choose to base his premium on his health underwriting and, thus, leave less healthy people behind in the community-rated pool.

Why is this scenario preposterous? If a state went the direction the CBO imagines, it would be the state’s choice. The waiver gives states the freedom to choose several different directions. Why would the CBO assume a state would choose this direction when no state ever chose this type of regulatory structure before Obamacare? Why choose this direction when, as the CBO points out, there are such obvious pitfalls?

Moreover, while the language of the bill could be much more clear, it’s also reasonable to read the House bill to limit the application of underwriting to only high-risk people, which would stop healthy people from choosing the underwritten pool…. This reading makes much more sense in the context of allowing states to establish different ways to cover people with pre-existing conditions that don’t burden the rest of the nongroup market with their high costs. That certainly appeared to be the intent of the waiver.

The Congressional Budget Office is generally touted as “non-partisan,” which is technically true. But non-partisan does not equal reliable. With respect to both Obamacare and the House bill that would repeal and replace it, the CBO’s work product has been shoddy and unreliable.