Monday, March 13, 2017

Voters Won't Ignore This CBO Score

By Megan McArdle
The Bloomberg View
March 14, 2017

Well, the Congressional Budget Office has released its score for the new Republican health care bill. And those of us who covered Obamacare’s passage are having flashbacks to 2009.

Those flashbacks, however, are not completely parallel. During the process of passing the Patient Protection and Affordable Care Act, or PPACA, many of us complained that Democrats were gaming the CBO process, tossing out desperate cuts and pay-fors over and over until they got the score they wanted, in much the way video-gamers try to kill a hard boss. They ended up jamming in a bunch of provisions that made Obamacare’s finances look sturdier than they were, but realistically, had no hope of ever taking effect (among my favorites: a never-never long-term care program, and a requirement that everyone in the country had to issue 1099s to anyone who sold them more than a few hundred dollars worth of stuff). We certainly can’t accuse Republicans of that!

The CBO score says that under the Republican plan, 24 million fewer people would have insurance in 2026, compared to their projections under current law. Premiums for the next few years would be higher than projected under Obamacare, then lower, as the markets stabilized with a younger insurance pool and somewhat less generous insurance being purchased by those younger, healthier customers. In 2026, the budget deficit would be $92 billion lower than currently projected, with a total savings of $336 billion over ten years.

I mean, I sure do like those budget numbers. On the other hand, 24 million is a whole lot of folks. Republicans are going to stand accused of taking insurance away from a lot of needy people in order to cut nearly a trillion dollars worth of taxes. And in fairness, that is kind of what this bill does.

Now, to be sure, some folks will not so much be losing insurance as deciding not to buy it because they don’t get good value out of it right now -- or can’t afford it. According to the CBO, under Obamacare, a 64-year-old making 450 percent of the federal poverty line, or about $53,000 a year, can expect to pay $15,300 a year for a plan that covers 65% of their expected medical expenses. You can easily see why someone in that situation would be reluctant to pay that much for insurance. Many others will be “young invincibles” who see no reason to pay for insurance when they never get sick, and thanks to the repeal of the mandate, now won’t have to.

On the other hand, let’s look at what happens to a near-senior who’s currently eligible for big subsidies, and benefits from a rule which says that insurers cannot charge older people more than three times what they charge their youngest customers. While the 64-year-old in the above example actually benefits slightly from the Republican health care law, seeing their premiums drop by $700, their twin brother making 175 percent of the federal poverty line, around $20,000, will see their premiums rise from $1,700 to $14,600 -- an amount that would be pretty much mathematically impossible for them to pay. Indeed, as you get nearer to the poverty line, it is theoretically possible for a 64-year-old to face premiums that actually exceed their income.

That’s going to be … a hard sell. The AARP will not like it, nay, they will not like it at all. And things the AARP does not like tend to have a hard time getting made into law.

Moreover, many of the folks who will see their insurance options shrink are those older white voters in rural districts who helped put Trump over the top. The merely middle aged won’t get hurt too badly, though they, too, will see their premiums go up. But the older, not-poor-but-sure-not-rich folks? They get creamed.

Regardless of what you think of Obamacare, or the new Republican bill, the politics of this are dreadful. Republicans made fun of Democrats for spending a year wrangling over trivia and tossing ideas into the CBO black box to see what kind of numbers it would spit out. They vowed they wouldn’t repeat that mistake. But this is what happens when you don’t repeat that mistake: You get a score that’s going to make your bill darned hard to take to voters.

Oh, sure, they can quibble with the score. I can quibble with the score, as I did with the scores that Obamacare got. The CBO does not retire into its back office with a crystal ball and read off the budget numbers it sees therein; they do the best they can to guess at the future with very limited knowledge and imperfect models. (That is in no way a slam on the CBO; all I’m saying is, economic science has not advanced to the point of perfect forecasting, and probably never will.) We do not rely on CBO scores because they are particularly accurate, but because they are consistent, allowing us to compare bills to each other -- and because they provide an exceptionally useful check on the wildly overoptimistic estimates that politicians would produce on their own.

So we could argue about whether 14 million people are going to lose or give up insurance coverage in 2018, mostly due to the lapsing of the individual mandate. We could argue about whether the insurance markets are going to stabilize with a younger, healthier pool, as the CBO suggests, or whether I’m right that there’s a substantial risk they won’t stabilize and will instead start spiraling towards death. We can argue about whether a bunch more states were really going to do the Medicaid expansion (some of the increase in the uninsured projected by the CBO stems, not from people who now have insurance losing it, but from people who would have become eligible for Medicaid if their state had expanded the program, even though this hasn’t happened yet).

But I do not think this is apt to be a very successful tactic, politically. You know what voters are not interested in? Abstract technical arguments about forecasting assumptions. As someone who enjoys nothing than a lively conversation about such abstruse topics, you will have to trust me when I say that the ordinary voter’s eyes glaze over and they rapidly start remembering very important appointments all the way across town. Oh, sure, a few thousand people on internet message boards will become very passionate on the subject. The average voter is going to remember whatever numbers were in the headlines, or scrolling by on the nightly news.

Thus, for want of a crystal ball in anyone’s hands, the CBO score is going to provide the canonical numbers in discussing this bill, no matter how hard Republicans complain about their assumptions. And that number is going to make it difficult -- I don’t say impossible, but surely very difficult -- to get this thing passed.

Of course I said the same thing in 2009: it was political suicide for Democrats to pass Obamacare. I was right. And yet, they went ahead and did it anyway. The policy effects of bills aren’t the only thing that’s hard to predict.

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