Good news? Maybe.

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Obamacare's Good News Only Tells Half the Story

Megan McArdle is a Bloomberg View columnist. She wrote for the Daily Beast, Newsweek, the Atlantic and the Economist and founded the blog Asymmetrical Information. She is the author of "“The Up Side of Down: Why Failing Well Is the Key to Success.”
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Is Obamacare costing less than we expected? I've seen notes to that effect on the Web and social media, thanks to newly released estimates from the Congressional Budget Office. However, that's something of a misreading of the CBO document, which only covers the cost of the insurance coverage provisions in Obamacare. Those are obviously a huge part of the law. But they're not the only part of the law, and we don't have a CBO estimate for the rest.

I imagine that by now you are thoroughly confused. But actually, it's fairly simple. The Affordable Care Act, aka Obamacare, included a number of (expensive) provisions intended to increase insurance coverage. It also had a number of tax increases and spending cuts intended to pay for the insurance expansion. The former minus the latter is the cost of the law -- though because that number was actually negative in the original score, indicating a small amount of deficit reduction, perhaps we should say the "benefit." 

Basically, the new CBO analysis addresses the first portion but not the second. The insurance coverage provisions, it thinks, will actually cost almost $150 billion less than expected, thanks to a number of changes: slower overall growth in health-care costs; the decision by insurers to offer cheaper "narrow network" exchange plans with a reduced selection of doctors and facilities; and revisions to assumptions about everything from how many people were on Medicaid before the law took effect to how many people will lose their employer-sponsored insurance thanks to the law.

On the revenue side, however, it is mostly silent. And we've seen some slippage on the revenue side: For example, the Barack Obama administration has so far been reluctant to implement the required cuts to the Medicare Advantage program, which were a major revenue source under the original law.

Does that mean Obamacare isn't generating more deficit reduction than predicted? No. The lower insurance costs are great news for the federal budget. But you can't get that out of this analysis -- or any other analysis, I fear, because the CBO has stopped scoring the law as a whole. We should be glad to learn that the CBO thinks we'll be spending less on subsidies. But we shouldn't put more weight on that statistic than it can actually bear.

(Corrects insurance coverage costs in third paragraph of article published March 10.)

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Megan McArdle at

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