Foundation

History of Off-Target Estimates of Health Care Overall Raises Should Give Pause

by Demian Brady / /

Republicans in Congress and the White House are attempting to do something that has hardly ever been before – not only repealing, but also replacing, a major entitlement program with a more sustainable alternative. Even the welfare reform effort initiated in 1996 did not involve as many elements of policy, as many people, or as many dollars. The fate of the new American Health Care Act (AHCA) may well hinge on the analysis produced by a government agency that many people outside of the Beltway have never heard of before – the Congressional Budget Office (CBO).

As CBO’s estimates are making media headlines this week, lawmakers – and taxpayers – are well advised to consider the agency’s history in this (and other) policy areas. Although CBO often provides accurate assessments, its data – like that of any other federal agency – ought to be carefully evaluated and put into perspective. This is why NTUF released a new issue brief detailing the role that CBO's analyses have had on recent debates of legislation to enact major overhauls of health care.

CBO's report that President Clinton's “Hillarycare” health care proposal in the early 90s would add to the deficit stopped the plan in its tracks. With “Obamacare,”, however, CBO determined that it would reduce the deficit, which allowed the legislation to be ushered through the Senate using the reconciliation process. This in turn cleared a major hurdle by reducing the threshold of votes necessary to get the bill passed. If CBO’s score of Obamacare had reflected its budgetary predictions of HillaryCare’s impact – a real possibility if the individual mandate had been scored as a tax – the bill would have languished in the Senate due to political and procedural obstacles.

Among the other big problems in CBO's Affordable Care Act (ACA) estimates include:

  • The CLASS Act’s “Savings”: This long-term care program was scored to add significant offsetting receipts of $102 billion to the ACA package, but they never materialized. The CLASS Act was riddled with adverse selection flaws and was eventually shelved by the Department of Health and Human Services when the Secretary at the time there was no sustainable way forward to implement it. Congress subsequently affirmed the decision amid controversy that the CLASS Act was essentially an attempt to game CBO’s scoring conventions.

  • The Expanding Costs of ACA’s Medicaid Expansion: The actual number of Medicaid enrollees turned out to be 50 percent higher than CBO projected, thus driving up the budgetary impact. The costs for FY 2015 had been projected to be $42 billion but turned out to be $68 billion – 62 percent higher.

  • Exchange Enrollment: In reality, the impact of the individual mandate's “tax-penalty” had less of an impact on enrollment in the ACA's exchanges than anticipated.

While in many cases, the actual cost of major health care legislation typically turns out to be much higher than anticipated, there are exceptions. CBO's score of the bill to establish the Medicare Prescription Drug Benefit, known as Part D, proved to be much more expensive than actual experience proved.

Forecasting the budgetary and economic impact of sweeping legislation like the ACA or the AHCA is no easy task, however recent history shows that scorekeeping orthodoxies got in the way of providing complete and realistic scenarios of possible outcomes. In any case, once again taxpayers are reminded that CBO is regarded in the media and among many in Congress as a final arbiter, even when that final arbiter expresses caution over its own findings.

 

NTUF’s Issue Brief #169, Shaky Ground: Congressional Budget Office Estimates of Major Health Care Reforms is available at ntu.org/cbo.


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