The Case Against the CBO
House Republicans are being criticized from all directions for their health-care bill. On the left and the center-right, the chief criticism concerns how many people would leave the insurance rolls under the legislation.
That criticism is correct, and Republicans should make alterations so that a lot more people get covered. But the criticism is also exaggerated.
Republicans fear, and Democrats hope, that the Congressional Budget Office will eventually determine that the legislation would cause 10 million to 20 million fewer people to have coverage. That may be why Republicans are holding votes before the CBO can finish its work.
But the CBO has gotten its estimates badly wrong before. Before Congress enacted Obamacare, the office projected that by this year, its exchanges would enroll 23 million people. As late as June 2015, the CBO was sticking to this projection. The actual number is about nine million.
The CBO believes strongly in the power of Obamacare’s fines on people without insurance, the so-called “individual mandate.” Two months ago, it estimated that an earlier bill to repeal much of Obamacare would have led to 18 million fewer people having coverage, with five million of that total coming from reduced Medicaid enrollment. Its report then added, “Most of those reductions in coverage would stem from repealing the penalties associated with the individual mandate.”
If this is right, the implication is that many people who would “lose” coverage after the partial repeal of Obamacare would be better described as people who would drop their coverage. They are buying it only to avoid the fines, and do not think their coverage is worth what they are paying for it. If we buy the CBO’s analysis, our concern about a large fraction of the people who would leave the insurance rolls should be mitigated by the fact that they want to.
Maybe we shouldn’t buy it. The CBO’s estimates for Medicaid are especially hard to believe. It’s plausible that the fines have been somewhat helpful in getting people who are eligible for Medicaid to sign up for it. Something about Obamacare seems to have had that effect, at any rate: After it became law, an increased percentage of the people who were eligible for Medicaid even beforehand started to actually apply for it. It may even be the case that some people with incomes low enough to escape the mandate mistakenly thought they had to sign up for Medicaid to avoid paying the penalties.
But would millions of people really leave Medicaid if the fines ended? Would they really, that is, stop taking advantage of a free program? The assumption that they would goes way beyond thinking that inertia or confusion keeps people from signing up. It entails thinking that people are positively averse to getting insurance.
None of this means the Republicans’ approach to health care is right. A lot of them say that health care is what matters, not health insurance. This talking point ignores how insurance protects people from the risk of serious financial setbacks. And the legislation could do more to facilitate coverage.
Many Republican bills, including the one now before Congress, have offered tax credits for people who lack access to Medicaid, Medicare or employer-provided coverage to buy their own policies. Some conservative reformers argue that Republicans should offer more generous tax credits to people with low incomes.
They should probably also require insurers who benefit from the credit to offer at least one policy with a premium equal to the credit. Even if that policy had a high deductible, it would limit their financial exposure at no charge to them. Another worthwhile step would be to let states assign people who did not choose an insurance plan one of those policies, defeating the power of inertia.
The way the CBO evaluates health legislation is one reason Republican legislation does not include these ways of boosting coverage. If you’re a health-policy staffer for a leading congressional Republican, advocating for more generous tax credits for people with low incomes would require taking on conservatives who object to progressivity. And even if you win that fight, the CBO might still say that coverage will decline substantially without the individual mandate.
If the CBO is wrong about the impact of that mandate, then its numbers on the loss of coverage are too large. If it is right, then there is less reason to worry about those numbers. All in all, then, the public debate could stand to focus less on those CBO numbers.
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Ramesh Ponnuru at firstname.lastname@example.org
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