An analysis against CBO stance on Obamacare
CBO’s Secret: 73% Of Coverage Difference Between Obamacare & GOP Bills Driven By Individual Mandate
By Avik Roy
If you’ve read a newspaper or watched cable news in the last month, you’ve probably seen someone say that the Senate GOP health care bill would “kick 22 million Americans off of their health insurance.” But it’s not true. New information from the Congressional Budget Office—leaked to me by a congressional staffer—shows why.
CBO’s faith in the individual mandate’s magical powers
For years, the CBO has been convinced—despite real-world experience to the contrary—that Obamacare’s individual mandate is the biggest reason why that law has increased the number of Americans with health insurance.
When Senator Barack Obama ran against Hillary Clinton for the Democratic presidential nomination in 2008, he mocked Hillary’s insistence on an individual mandate. “If a mandate was the solution,” he said at the time, “you could try that to solve homelessness by mandating that everybody buy a house. But the reason they don’t have a house is they don’t have the money.”
After Obama became president, the CBO told him not having an individual mandate would mean his health reform plan would cover 16 million fewer people. So Obama relented, and included an individual mandate in what we now call Obamacare.
Proposals to repeal and replace Obamacare from congressional Republicans and right-of-center think tanks disagreed on a number of things, but they were unanimous in repealing Obamacare’s individual mandate. The idea that Americans should be forced by the government to buy a private product, merely for the offense of being alive, is seen by all conservatives as a constitutional injury.
And there’s a more fundamental question: if Obamacare’s insurance is so wonderful, why do millions of Americans need to be forced to buy it? By definition, you haven’t been “kicked off” your insurance if the only reason you’re no longer buying it is that the government has stopped fining you.
Source: Congressional Budget Office
CBO has refused to disclose the impact of mandate repeal on coverage estimates
Arguably the most significant data point in the entire debate about the Senate health care bill has been the CBO’s claim that in 2026, 22 million fewer people would have health insurance under the Senate bill than under Obamacare.
Democrats have seized on this number to stoke fears about the bill’s impact; moderate Republicans, intimidated by the negative headlines, have been reluctant to support the bill.
But buried within the CBO’s reports is a key fact: the vast majority of those coverage “losses” occur because the GOP bills repeal Obamacare’s individual mandate. In its July 20 estimate of the most recent version of the Senate’s Better Care Reconciliation Act, or BCRA, CBO says that in 2018, 15 million fewer Americans will have health insurance under the bill, two years before its repeal of Obamacare’s insurance subsidies takes effect.
Why? It’s “primarily because the penalty for not having insurance would be eliminated.”
Ok. But here’s the curiosity. The CBO has refused to disclose the specific, year-by-year impact of that thing that it says is the primary reason that people will go uninsured in 2018 and beyond.
This is a critical omission.
You’d think that CBO would want to include in its tables its actual estimates of how much impact the individual mandate is having on coverage under the GOP bill, and how much impact other factors are having, like the bill’s replacement of Obamacare’s Medicaid expansion with refundable tax credits.
You’d think that, but CBO has refused to disclose that breakdown. The end result is a lot of misleading commentary about how Republican plans “take coverage away” from 22 million people.
Previously undisclosed estimate: Three-fourths of CBO coverage difference is the individual mandate
This week, I obtained from a congressional staffer the CBO’s estimates of the coverage impact of repealing the individual mandate, separate from the Senate bill’s other provisions. The estimate was built out of earlier work CBO did to model how repealing the mandate would affect the federal deficit. CBO projected then that repealing the mandate alone would lead to 15 million fewer insured U.S. residents in 2018, and 16 million fewer by 2026, though they did not publish those estimates.
16 million represents nearly three-fourths of the CBO’s estimate of the coverage difference between the GOP bills and Obamacare in 2026. That’s despite the fact that, as I noted in March, even Jonathan Gruber—one of Obamacare’s most famous advocates—believes Obamacare’s individual mandate is having little effect. In a 2016 article for the New England Journal of Medicine, Gruber and two co-authors wrote, “When we assessed the mandate’s detailed provisions, which include income-based penalties for lacking coverage and various specific exemptions from those penalties, we did not find that overall coverage rates responded to these aspects of the law.” (Emphasis added.)
FREOPP.org
Excluding the individual mandate, about the same number of people will have health coverage under Obamacare and the Senate bill
To be clear, even if one excludes the CBO’s exaggerated view of the impact of the individual mandate, CBO scores the Senate bill as covering 6 million fewer people than Obamacare in 2026: 2 percent of the U.S. population. But even that number can be partially explained by CBO’s outdated March 2016 baseline, which assumes that enrollment in Obamacare’s exchanges peaks out at 19 million, when it’s more likely to end up below 9 million, if Obamacare stays on the books and premiums continue to rise. (That’s the difference between the red and green curves in the above chart.)
Even if we assume that half the difference between the March 2016 exchange enrollment projections and the real world is accounted for by the exaggerated mandate effect, the net result is that the CBO’s projection of the difference in health coverage under Obamacare and the GOP bill—the pink bars in the below chart—amounts to statistical noise.
Sources: CBO, FREOPP.org
GOP moderates have no reason to be intimidated by exaggerated coverage loss claims
As I noted above, a number of GOP moderates have cited the CBO’s 22 million figure as the key reason why they’re reluctant to support the BCRA. But if they support repealing Obamacare’s individual mandate, then they support any bill that, according to the CBO, would “reduce” coverage by 16 million people.
The GOP Senate health reform bill does repeal Obamacare’s Medicaid expansion. But it replaces it with a robust system of tax credits and block grants that ensure that every single person enrolled in that Medicaid expansion will get financial assistance to afford private coverage. Senate Republicans could spend even more money covering Obamacare enrollees’ health care costs—and they might want to—but the CBO’s model is designed to treat any mandate-repealing GOP bill as covering fewer people than Obamacare.
(10/X) CBO is obviously wrong about that. Hence GOP should focus on good policy and not defer to CBO on coverage estimates.
— Avik Roy (@Avik) July 23, 2017
The CBO’s love affair with the individual mandate is the reason why there’s really nothing Republican senators can do to improve the CBO’s coverage score of their bill. It doesn’t matter how much money Republicans throw at the problem; if you don’t have an individual mandate, CBO assumes 16 million fewer people will have coverage right off the bat. It doesn’t matter if you keep nearly all of Obamacare’s spending and most of its taxes, as Sens. Bill Cassidy (La.) and Lindsey Graham (S.C.) propose: CBO assumes 16 million fewer people will have coverage right off the bat.
So, the choice for Republicans is this. Do you support repealing Obamacare’s individual mandate, or preserving it? If you support repealing it—whatever other policy details you prefer—the CBO is going to generate misleading headlines about 16 million people being “kicked off” their insurance.
If you support repealing the mandate, you’re going to need to surpass those headlines and do what you were elected to do: replace Obamacare with market-based policies that show that patient-centered health reform is better than government-centered health reform.
