Does the CBO know the score?

The Congressional Budget Office has re-scored Obamacare in light of the Supreme Court’s decision. The CBO finds that the decision’s impact is fairly minimal — about 3 million fewer Americans insured in ten years, and about $84 billion less in spending over the next ten years (out of a total of about $1.7 trillion in spending on the law’s coverage provisions) than would otherwise have happened.

Yuval Levin is not persuaded. First, CBO does not offer specific state-decision scenarios on which states will reject the Medicaid expansion. Instead, it offers an average of an unknown number of scenarios with an unpublished range of outcomes. This “helps to minimize the appearance of uncertainty and the sense that the Court decision dramatically affected the range of plausible outcomes, though it surely did.”

Second, CBO assigns essentially no effect to the Court’s decision that the mandate does not involve a penalty, just a tax. But the CBO’s original analysis was based on its assessment of the extent to which people would comply with a requirement (supported by a penalty) that they buy insurance. On this basis, CBO made what Levin calls very optimistic assumptions about compliance:

The insurance reforms in Obamacare create huge incentives for young and healthy Americans to avoid purchasing health insurance until they get sick. CBO originally projected that the vast majority of these people would still buy coverage, despite the mandate’s low penalty (relative to the cost of insurance), and in doing so the agency relied to a significant extent on evidence from behavioral economics suggesting that people obey legal requirements even when the penalty for doing otherwise is low.

The Roberts decision last month, for all its considerable incoherence, would seem to close off that particular argument, since it plainly stated that the mandate could no longer be understood as a mandate but only as a tax on the uninsured. Would a $695 tax make you buy a $5,000 insurance policy if you knew you could get the policy for the same price later if you needed it?

Thus, although the Court’s decision probably won’t significantly affect the number of uninsured who buy insurance, it does undercut the CBO’s original estimate of that number, showing that CBO probably overestimated it considerably. Yet CBO clings to its original number.

But even if the CBO is right in its highly optimistic re-scoring, we still have a huge problem. Levin explains:

The agency projects that the federal government will spend about $1.7 trillion, increase taxes by about a trillion dollars, and cut Medicare spending by more than $700 billion without any real structural reforms of the program (though it’s hard imagine that last one would actually happen in practice). It will create yet another unsustainable health-care entitlement program, expand the existing ones, micromanage the insurance industry in ways likely to make it even less efficient, employ even heavier price controls of the sort that have always failed in Medicare, and (especially through its taxes) stifle employment, investment, and medical research. And after all this, even the CBO’s very optimistic assumptions leave it concluding that 30 million Americans will be uninsured a decade from now—so we will have gone from today’s 80% coverage to 89% in 2023. If that’s what the Left means by universal coverage, there are far, far less costly and counterproductive ways to get there.


JOHN adds: Jeff Sessions, ranking Republican on the Senate Budget Committee, has just released this statement on the CBO’s re-scoring of Obamacare:

CBO has now told us that total spending on only the coverage provisions of the President’s health law is $1.7 trillion—a far cry from his promised price tag of $900 billion. But once the accounting tricks are removed—such as the delayed implementation of the major spending provisions—we know the law will cost more than two and half trillion dollars over its first full 10-year window beginning in 2014. Over the long term, it will add $17 trillion to our nation’s unfunded liabilities—more than double that of Social Security. Repealing this 2,700-page monstrosity is an essential step in order to restore fiscal sustainability to our nation.

The score continues to cite the lower cost of the first two years when the law is not implemented. More importantly, it double counts over $400 billion in new revenue—one of the biggest accounting gimmicks of all time. Further, the CBO analysis does not take into account implementation costs or the cost of the ‘Doc Fix,’ which alone amounts to another $300 billion. I am amazed that the CBO score omits these facts.

For CBO to contend that this law will create a surplus is a colossal misstatement of reality. This kind of cost analysis helps explain why the nation is going broke.

The press reflexively refers to the Congressional Budget Office as the “nonpartisan CBO.” A recent study of political contributions by employees of the CBO sheds light on that characterization. If I have time, I will get to that later in the day.