Another Botched ObamaCare Estimate

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Business groups have complained bitterly about the costs imposed by the president's 2010 health care overhaul, and the administration has often responded by insisting that in fact there are provisions in the law designed to help business: for instance, the small business tax credit, which last year the administration predicted would provide "an estimated $6 billion in premium relief in 2010 to 2011." The Department of Health and Human Services pointed to a Commonwealth Fund study estimating that more than 16 million workers would be eligible for the tax credits under the law. 

But elgiibility does not mean accessibility, and neither the savings nor the number of projected beneficiaries have matched early predictions. The value of the credits claimed so far is just $468 million, according to a Government Accountability Office study released today. The number of employees who worked for businesses that claimed the tax, meanwhile, was about 770,000. 

Why the lower-than-expected utilization? The GAO report suggests that initial estimates overestimated the popularity of the credit in part because they didn't account for either the complexity of the eligibility rules or the large amount of time needed to calculate the exact value of the credit (remember, this is a credit for small businesses that probably aren't generally interested in investing lots of time or effort in tax prep). 

The law's backers, in other words, underestimated the complexity involved with complying with the law and thus underestimated the accessibility of the benefits they thought they were handing out. I suspect we'll see more of this as implementation continues. 

This certainly isn't the first time the law's early projections have proven wrong. The law's $5 billion early retiree program handed out hundreds of millions of dollars to government unions and big employers and had to be shut down early (the administration decided to declare this a "success"). Enrollment in the law's high-risk pools for individuals with preexisting conditions has been dramatically lower than expected, with about 61,000 enrollees versus the 375,000-plus projected, while per-member costs have come in at double initial estimates

The lesson going forward, then, is one that should be familiar by now: When it comes to ObamaCare, don't trust the optimistic spending or utilization estimates touted by the administration. We don't always know how they'll go awry, but it's a pretty good guess that the original estimates won't match the practical outcomes. 

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