Affordable Care Act

The CBO's Health Care Score Shows Economists Shouldn't Make Political Predictions

The AHCA is testing the limits of the Congressional Budget Office's authority.

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Jeff Malet Photography/Newscom

Spend enough time reading Congressional Budget Office reports, and you start to notice something: Although the nonpartisan congressional scorekeeper puts a lot of effort into carefully relaying their estimates, they are more cautious when it comes to explaining how those projections were obtained, noting the various forces in play but not describing the precise methodology at great length. Similarly, the CBO often highlights uncertainty around its estimates, but less often attempts to quantify that uncertainty. The office tends to release point estimates rather than ranges, noting that its estimates are designed to fall in the center of the likely range, however large or small it might be.

There's a reason for this: In addition to providing estimates about the likely effects of legislation, the CBO's goal is to corral discussion of a bill around a single number. That number may not be exactly correct; in fact, it almost never is, and CBO does not dispute this. But it represents a sort of extremely well-educated best guess, one that attempts to identify the most likely outcome, even if that specific outcome is itself not all that likely. And the CBO's opaque characterizations of its methodology limit, to some extent, the arguments that can be had about its calculations and assumptions.

What this means is that the CBO is designed to push people—the media, the public, and especially legislators in Congress—to discuss the potential results of legislation rather than to argue about how the CBO came up with its estimate. The CBO wants lawmakers to debate what a bill would do, not what the CBO has done.

There is some genuine utility in this approach. Focusing the discussion on point estimates rather than on ranges means that partisans cannot cherry pick a convenient high or low figure, and it nudges the conversation toward one that is more focused on policy outcomes than on procedural arcana.

But there is also some organizational self-interest involved as well. It's a process that is designed to preserve the CBO's authority, because it implicitly encourages legislators to act as if any given bill will do what the CBO says it will do, regardless of how likely it actually is. It's a process, in other words, that is designed to preserve the CBO's authority.

And there are limits to that authority, as well as to the process as a whole. The CBO's latest score of the Republican health care plan tested those limits.

Released yesterday evening, the score is CBO's third report on the American Health Care Act (AHCA), which would partially repeal and replace on Obamacare. But it is the first to CBO report to assess the version of the bill that actually passed in the House earlier this month. House Republicans made a series of amendments to the earlier versions of the legislation, adding funding for high-risk pools and a provision that was supposed to give states more flexibility to opt out of Obamacare's major regulations. Republicans argued that the adjustments would make coverage more affordable while preserving preexisting conditions protections.

The House GOP then took the unusual step of voting on the bill without the CBO's score. The results show why.

The CBO estimated that the bill, as passed, would result in 14 million fewer Americans with health coverage in the space of a year, and 23 million fewer with coverage a decade from now. That represents a slight decrease in projected coverage losses versus a previous version of the bill, which was estimated to result in 24 million fewer people with coverage. But it is still a rather large number, especially for a bill that purports to replace Obamacare and preserve some of its regulatory protections for preexisting conditions.

Notably, 23 million is the exact same number that CBO projected for a simple repeal of Obamacare with no replacement at all. That's worth dwelling on for a moment. CBO is saying that, in terms of coverage, the GOP bill to replace Obamacare would not be any different than repealing the existing health care law outright and replacing it with nothing.

The CBO also warned that the state flexibility amendments added to the version of the bill that passed in the House would undermine insurance markets rather than improve them.

Despite additional funds, less healthy people, including those with preexisting conditions, "would ultimately be unable to purchase comprehensive nongroup health insurance at premiums comparable to those under current law, if they could purchase it at all," the report states. "As a result, the nongroup markets in those states would become unstable for people with higher-than-average expected health care costs."

Like I said, you can see why Republicans chose to vote on the bill before the score came through.

But how, exactly, did the CBO arrive at those headline numbers? That's where things get tricky. The final House amendments to the AHCA gave states the option of applying for waivers to opt out of Obamacare's community rating, which limits the ways in which insurers can price insurance based on health history, and essential health benefits rules. So one of the questions the CBO had to answer was: How many states would pursue a waiver? That's not a question that can be answered with an economic model or a historic comparison. It is a political question, and it's one that the CBO simply isn't well-suited to answer.

Yet in order to score this version of the AHCA, the CBO had no choice but to make assumptions about which states would opt out. The report assumes that about a third of the population would end up in states that obtain waivers to opt out of some of Obamacare's regulations. About a sixth of the nation's population would end up living in states that opted out of both the essential health benefits rules and community.

And, tellingly, it simply declines to estimate the effects that opting out would have on premiums would have on those states. Yet it still provides an overall estimate on premiums nationally. (CBO officials told The Washington Examiner's Philip Klein that the range was so large that it would be misleading to provide an average—information that wasn't in the original report.)

The report offers a general explanation as to why it settled on these estimates including market conditions and the past behavior of states. The report stresses the broad uncertainty involved in making an estimate like this.

But what it doesn't quite say—what it can't say—is that ultimately, the decision to apply for a waiver is one that cannot really be estimated by the economists and wonks at the CBO. It's a political decision, not an economic projection.

That is not the CBO's fault. It's not because the office lacks expertise or because it is somehow institutionally biased. On the contrary, the deeply technical and apolitical nature of the nonpartisan CBO, which has always tried to keep politics out of its economics, is part of the reason this is such a challenge. Instead, it's because the question is one that cannot really be answered by anyone, because it is a prediction about highly contingent human whims.

At this point, no one knows how states would respond to the opt-out provisions, including, I think it's fair to say, most state lawmakers. After Wisconsin Gov. Scott Walker said he would consider applying for a waiver, he ended up in a tense confrontation with a local Democrat. It's clear from that scene alone that the politics surrounding the waivers would be tumultuous.

A non-partisan economic scorekeeper like the CBO doesn't really have a way to deal with a bill like the AHCA. It is in some sense unscoreable. But the CBO has to score it anyway.

That is not to say that the CBO's scores have no value, or should be dismissed entirely. Even on a project like this, the CBO provides directionally useful analysis that can and should help shape the debate. Even an imperfect score is more useful than no analysis at all, which is what many of the CBO's critics would seem to prefer. In this particular case, it is almost certainly the case that the GOP legislation would lead to millions fewer with coverage, and would result in pockets of insurance market instability.

But it's hard to go much further than that, and harder still to predict how the political debate around waivers would turn out. Even the CBO's founding director, Alice Rivlin, seems to agree. "It's just too complex and too political," she told Politico prior to the analysis being published. "I just don't see how they do this. It will cause complications but the idea that they could come up with a number seems to me, just a bridge too far." But come up with a number is what the CBO did.

Which is why the AHCA, perhaps more than any other legislation, reveals the structural limitations of the CBO's process and self-conception, and the problems that eventually arise from the opacity with which it conducts its estimates. It is hard for economists to make political predictions, and harder still to convincingly project authority on a subject about which no one can truly be authoritative.

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  1. FFS. 🙂

  2. What this means is that the CBO is designed to push people?the media, the public, and especially legislators in Congress?to discuss the potential results of legislation rather than to argue about how the CBO came up with its estimate.

    Well it’s not working, so what now?

    1. Pete’s just pointing out that he’s the only one smart enough to see through to the heart of the system.

  3. Another reason to work budgets with only a single year ahead.

    In other words, what do we expect the total revenue from taxes to be next year. CBO bases figures on that.

    Of course, that curbs the fancy stretching of numbers 10 years down the road when multiple Congress’ are in play and at least one other President.

    The CBO acts like designed- make votes on budgetary items seem like less of an impact on taxpayers than they are.

  4. I know this is a non-starter, but what the CBO score really does is show that 1: Politicians shouldn’t be making economic predictions and 2: Massive, economy-reorganizing pieces of legislation that are thousands of pages long shouldn’t be passed. Ever.

    1. *golf clap*

  5. It is a political question, and it’s one that the CBO simply isn’t well-suited to answer.

    Bullshit. It could give 3 scenarios if it wanted to. The Social Security Administration gives 3 bullshit estimates all the time.

    First assume all the states that voted for Trump and have GOP governors opted out.
    Second assume all the blue states with GOP governors opted out.
    Third, assume all the red states with Dem governors opted out.

    They wouldn’t have to spell it out this way, they could cover it up with population guesstimates. They could take the middle number of the 3 guesstimates and use that to come up with their “one number”.

    It’s not like anybody is taking the CBO that seriously anyway. The Dems hope the bankruptcy away, and the GOP pray the bankruptcy away. The important thing is that scapegoats are agreed upon.

    1. Come to think of it, they really only need one estimate: Assume all the states that “didn’t need insurance bailouts because they didn’t interfere with their insurance markets until Obamacare made them” opted out. Because that is what will happen.

  6. The CBO may be non-partisan but it seems to have an institutionsl bias that government programs will meet the utilitarian goals they set out to meet. What exactly is the CBO’ s predictive record?

    Furthermore, since the CBO is focused on getting a definite number, it does not matter what the range is of their actusl analysis. Especially since the media wants to treat CBO numbers as the Word of God.

    1. What exactly is the CBO’ s predictive record?

      Winner.

      We should track all government predictions and compare to reality.

  7. Unless you’re believer in the insurance fairy, the CBO projection kind of aligns with what any reasonable person would expect the policy itself to do.

    1. It’s true. Some people aren’t willing to pay for their own insurance and will lose their insurance if others aren’t forced to pay for it instead. Very straightforward, really.

    2. Because EVERYONE wants insurance that covers maternity, mental health care and substance abuse treatment. EVERYONE. And zero co-pays for “preventive care”. What kind of crazy person would want to spend $20 on a dcotor’s visit?

      1. What does that have to do with what I was talking about?

  8. CBO is saying that, in terms of coverage, the GOP bill to replace Obamacare would not be any different than repealing the existing health care law outright and replacing it with nothing.

    How fun!

  9. I was listening to the radio last night in the car when they did a top-of-the-hour ABC News brief. They had their analyst, a former Robert Wood Johnson hack, on to bleat at length about the millions that would lose insurance, the health impacts, etc., as a result of the new bill. They must’ve forgot to have the counterpoint person on to discuss the vastly greater numbers negatively impacted by Obamacare, the $20 trillion national debt, etc., because they went straight to the weather after that.

    This is not an endorsement of AHCA, but rather just another data point of major news outlets failing to do their jobs.

    1. Give them a break. They literally couldn’t find a person within their social/professional circles who was willing and able to present said counterpoint.

    2. Enlighten us with these numbers. And would this hypothetical counterpoint-maker insist that Trump not sign any bill without major revenue increases, since the debt is so important?

      1. There are two sides to the balance sheet and one of them started going parabolic a couple of decades ago (and it’s not the revenue side).

  10. and harder still to convincingly project authority on a subject about which no one can truly be authoritative.

    This does not apply to libertarianism, because I alone am the one true authority on who is or isn’t a real libertarian.

  11. Anyone here remember when H&R had intelligent commentators?
    Good times.

    1. I remember when we had Slimer Hi-C and you used to dress slutty. What happened to you DanO?

      1. Obama was elected, and he broke the chat-room’s brain.

        1. Now now, we must not blame others for our lack of style and substance. That’s poor form.

      2. Man, Slimer Hi-C was so awesome.

    2. Do we have to crowdsource new material for this handle as well?

      1. I don’t even know what that means.

        1. There’s an app for that

          1. Anyone here remember when H&R had intelligent commentators?

            1. o you ;3!

            2. I’m fairly certain you meant “intelligent commenters” both times… but are not a member of that set, apparently.

  12. I agree with most of what Peter writes here (which is rare). Good job, Pete.

    However, I have two points of (possible) contention. First, the lack of transparency in the development of the CBO’s estimates is a very, very big deal (maybe even a bigger deal than I believe Peter is making it out to be). No estimate is correct, but the methodology used to develop each is either reasonable or unreasonable. Interested observers should be able to review and replicate the CBO’s results. What the CBO is doing is an actuarial analysis (whether they use actuaries or not). As such, the Actuarial Standards of Practice (ASOPs) specify what an actuary must consider when developing estimates and what they must communicate about the methodologies used to develop those estimates. The ultimate goal is that another actuary can review and replicate the first actuary’s work. The lack of transparency, no matter how difficult the estimate, is an appeal to authority that makes the process political even if that isn’t the intention.

    Second, Peter states that “the CBO provides directionally useful analysis that can and should help shape the debate.” I think that can be true, not not necessarily. A score based on unreasonable methodologies can be misleading as to the direction of the results of the bill. Without the necessary transparency, we can’t be certain.

  13. good doctors don’t even accept insurance anymore. straight cash.

  14. “The CBO wants lawmakers to debate what a bill would do, not what the CBO has done.”

    We live in the golden age of noble lies. It seems that every issue, from casus belli and global warming to, yeah, healthcare are all sold with framing–and, for most of them, the real crux of the matter isn’t even a quantifiable variable. It’s usually about qualitative judgements that neither the CBO nor congress can make on my behalf.

    Moreover, if making the health insurance market behave reasonably well for average people means that the Obama Medicaid expansion necessarily needs to go the way of the buggy whip, then focusing on numbers like how many million people will lose insurance is more or less a red herring.

    It’s like telling us that whether or not we go to war with Assad is Syria depends on whether Assad used chemical weapons. It’s just framing. We can decide not to go to war even if he did use chemical weapons–for qualitative reasons that have nothing to do with the facts on the ground.

  15. ObamaCare is most correctly described primarily as a Medicaid expansion with an attached individual mandate to help the insurance companies deal with all the gouging would experience because of the Medicaid expansion. We cannot undo the damage of the Medicaid expansion without undoing the Medicaid expansion.

    More importantly, I have a qualitative preference for making choices for myself in a market rather than having my choices dictated to me by a bureaucrat and a bunch of politicians in Washington.

    Kill the individual mandate.

    Kill the Medicaid expansion.

    Pass the AHCA.

    Then let’s get to work on dismantling the other artificial barriers in the healthcare market.

    1. What’s so difficult about understanding that the “healthcare market” is fundamentally different from a market in normal goods or services? It will always have to be, in some form or another, an “insurance market,” right? Because the things you buy are often costly and come along unpredictably. It’s why all of society sees the prudence in forcing people who own cars to have car insurance and people with mortgages to have home insurance.

      Pretending that healthcare is like going to the store to pick a few things up serves only talking points, really. As in when Paul Ryan tries to sell this shit sandwich with nonsense about free choice. It’s an off-switch for thought. Maybe you choose a doctor. Maybe you choose a hospital. Otherwise, it’s up to the doctors themselves and nature. That’s no market, it’s just a thing in life we have to deal with. And the only difference between cars and bodies is that everyone has a body. So the only question is how to pay for it most efficiently. We’ll never get there will political horseshit that serves the interest of politicians who want votes but not anyone’s healthcare needs.

      1. That was the paragraph equivalent of “a lep is a ball”.

      2. What’s so difficult about understanding that the “healthcare market” is fundamentally different from a market in normal goods or services?

        It’s not fundamentally different. It is precisely, exactly the same. It has reacted to subsidies, meddling and price signals exactly as every market in the world does.

        The harder it reacts, the more subsidies, meddling and price signal-hiding we do, causing it to yet react harder.

        If you don’t understand price signals, you will continue to incorrectly believe that the “healthcare” market is magically special, therefore requiring more hidden price signals.

        We’re done here.

        1. It’s not magically special, but it is special. Name another market where the product is something nobody wants to buy but has to in order to live, but they can’t predict when.

          1. Wait wait, I know this one……………..prostitutes?

            1. It’s hard to think of because any such market tends to already be socialized. It’s only via accidents of history that healthcare is not already treated in this country the same way we have done education and law enforcement for centuries.

              1. Education has been public and compulsory for barely one century in this country, and given its outcomes, are you sure you want to use that as an example of successful socialism? Let alone law enforcement, which even you tend to bash on the regular?

                1. Yes both are successful socialism despite any flaws because the alternative is obviously and totally unworkable.

                  1. Ok, normally I don’t count you as one of the funny commenters. But putting law enforcement as an example of successful (heck anything really) is hilarious. Man, comedy credit where it is due buddy!

                    1. With bonus points for the unexpressed assumption that privately run schools are “obviously and totally unworkable” as compared with the silky-smooth operations of the public school system.

                    2. I didn’t say that. I said a system of only private schools with no subsidies is obviously unworkable. Especially if you’re the type who likes to go around telling people to pull themselves up from bootstraps.

                      We tried feudalism and most people didn’t like it! Why do you people want to reanimate it so much?

                    3. What do you mean “you people”? Don’t be a biggot man, it’s unbecoming.

                    4. I said a system of only private schools with no subsidies is obviously unworkable.

                      No, you didn’t. What you said was that we have only two options, socialism and “the alternative,” which “is obviously and totally unworkable.”

                      I guess I need another lecture on how to avoid binary thinking.

                      We tried feudalism and most people didn’t like it! Why do you people want to reanimate it so much?

                      Do you even know what feudalism is? And this wrapping a post that starts with “I didn’t say that” in reference to something that you did, in fact, say.

                      The irony – it burns.

          2. something nobody wants to buy

            I don’t really want to BUY anything. I want it all for free.

        2. Which is to say, what is even the point of talking about price signals in that kind of market?

          1. Because they still matter, and in health care, they’re badly broken. The end user of health care is rarely the one buying it – from the care provider’s perspective, the health insurance companies are the demand side, and insurance companies obviously have a different set of incentives for their choices than do individual human beings. Furthermore, the end user isn’t even usually the demand side of health insurance supply – their employer is. So there’s at least one and usually two breaks in the price signal mechanism for health care. Is it any wonder that health care (NOT insurance) is so goddamn expensive?

            Price signals do matter when it comes to health care, just as they do in the case of every other scarce good or service on the planet. It’s just that their shit is all fucked up.

            1. But people can’t be expected to plan ahead when it comes to healthcare, or education, or law enforcement, because, reasons.

      3. “It’s why all of society sees the prudence in forcing people who own cars to have car insurance and people with mortgages to have home insurance.”

        Uh, where do you live? Homeowners insurance isn’t required by law. In some cases it’s required by mortgage companies. And comprehensive car insurance isn’t required… just collision. Not to insure the damage done to yourself or your vehicle, but to insure the damage you do to someone else or their vehicle.

        I choose to buy comprehensive auto insurance and various types of homeowner coverage. Because it’s a priority to me and I would prefer to spread those potential costs over time instead of risking being hit by one huge, unexpected bill. Health insurance is a similar priority for me.

        But, I don’t agree with forcing my choices on someone else. And I don’t agree healthcare is fundamentally an insurance market. Young, healthy people should have the option of taking that risk.

        1. But you have to acknowledge that in the freest of all lands, old people would simply go without healthcare en masse.

          Take risks young people, but make sure to plan diligently for exactly how long you’re going to live and the precise healthcare needs you’ll have when you get there!

          1. But you have to acknowledge that in the freest of all lands, old people would simply go without healthcare en masse.

            On what basis do you make this assertion?

            1. Because none would be insurable and only a few would be able to afford it out of pocket.

              1. Well that’s just not true at all. Now you’re just being sassy.

              2. Because none would be insurable and only a few would be able to afford it out of pocket.

                So, you’re assuming that

                1) No one would have insurance if they weren’t being forced.

                2) Without the AMA restricting the per capita number of doctors in the country to half of what it is in other developed countries, and without state governments restricting the number of hospitals that can be built, and without the FDA restricting the pharmaceutical market, that healthcare will nevertheless remain just as unaffordable as it is now, and

                3) No one ever finds it in their hearts to help anyone without the government coercing them to do so, because the people in the government have a moral cast of mind that other people fundamentally lack.

                1. Without the AMA restricting the per capita number of doctors in the country to half of what it is in other developed countries, and without state governments restricting the number of hospitals that can be built, and without the FDA restricting the pharmaceutical market, that healthcare will nevertheless remain just as unaffordable as it is now, and

                  HELLO!

                  People bitch about insurance, but these are the real reasons health care is so fucking expensive in the US. It’s a highly restricted, cartelized market. The supply is restricted and the high prices are subsidized. The worst of both worlds.

              3. 4) There’s a big ass difference between the pre-existing condition protections of HIPAA and PPACA. One is reasonable within an insurance market and one isn’t. I generally favor keeping the HIPAA protections (creditable coverage). But, it doesn’t necessarily need to be mandatory and I’m sure that a insurer could find a substantial and profitable market providing coverage with that kind of protection.

        2. “It’s why all of society sees the prudence in forcing people who own cars to have car insurance.”

          Forcing people to insure each other’s cars is morally reprehensible. People should only need to insure their own property against damage. Not other people’s property on their behalf.

          Taking your car out into the street is a fundamentally risky activity.

          You know what’s the worst about it–the way forcing people to buy insurance victimizes the poor.

          Why should someone with less than $100,000 in assets be forced by the government to carry $100,000 in insurance. If you drive a $100,000 Mercedes, why should a poor person driving a $1,000 care be forced to insure your Mercedes for you, you elitist prick?

          If you want to insure your car against an uninsured motorist, you’re perfectly free to do that. In fact, if you drive an expensive car around without a policy that insures against uninsured (poor) drivers, you’re an idiot.

          Stop using the government to force poor people to insure wealthy people’s property for them–and for God’s sake–stop using that as an example of the wealthy being properly forced by government to care for poor people who can’t afford insurance.

          Don’t you know that laws requiring auto insurance was just rent seeking by the insurance companies? Jesus, Tony, you can be sold anything! You’ll even use obvious government abuses of the poor as an example!!! You’re brainwashed. Can’t you see that?

          1. I agree with all of this, Ken – well put.

          2. Don’t you know that laws requiring auto insurance was just rent seeking by the insurance companies? Jesus, Tony, you can be sold anything! You’ll even use obvious government abuses of the poor as an example!!!

            ^ This.

            The fact that this is now used as precedent to justify the PPACA drives me nuts.

      4. Otherwise, it’s up to the doctors themselves and nature. That’s no market, it’s just a thing in life we have to deal with.

        What’s up to the doctors? Whether they treat you or not? How’s that different from any other non-slavery occupation?

    2. Kill the individual mandate.

      That’s the nut right there, but everyone involved knows that if you kill the individual mandate, it speeds up the death spiral.

      1. The individual mandate was meant to compensate insurance companies for the gouging they were about to (and did) suffer because of the Medicaid expansion.

        Get rid of the Medicaid expansion, and the “damage” done by getting rid of the individual mandate drops significantly.

        Oh, and the AHCA sunsets the ObamaCare Medicaid expansion.

        It’s a rare piece of sensible legislation.

  16. That number may not be exactly correct; in fact, it almost never is, and CBO does not dispute this. But it represents a sort of extremely well-educated best guess, one that attempts to identify the most likely outcome, even if that specific outcome is itself not all that likely.

    “Yes, they’re almost always wrong, but they’re still brilliant and we should take them very seriously!”
    -Pete MacAdoodle Suderweigel

    1. And I understand that what MacAdoodle is trying to say in his usual ham-fisted and clumsy manner is that of course they’re never EXACTLY right, but they’re usually “close enough” for government work as they say.

      But as is almost always the case, MacAdoodle is full of shit. They’re not usually close in their projections at all.

      1. If anyone would know ham-fisted and clumsy, it’s Simple Mikey.

  17. There is no such thing as “non-political” decisions. At least not in a world that involves people.

    Case in point, the latest Trump “muslim ban” just got shot down in the appeals court. 100% of the Judges on the full 13 judge panel who voted against it are democrat appointees. 100% of the judges who voted to uphold the ban are republican appointees.

    This should be a straightforward legal question. Does the president have the power to issue this executive order or not.

    Instead we have a bunch of judges chiming in with their two cents on how racist Trump is or how the dangerous terrorists are going to kill us all. WTF dudes, you are a step below the highest court. Could you at least pretend that you are looking at the law first?

    So no, it is no surprise that the CBO can’t help but put a partisan spin on even the most non-partisan things. Try though they might, they are still going to be human beings at the end of the day, and tribal thinking is way more powerful than reason.

  18. It’s not that difficult to reduce health care costs. Which makes far more sense than trying to figure out how people can pay for health insurance when US health care costs are at least 50% higher than what they would be under true free market conditions. Repeal of prescription laws, laws forbidding private import of medical drugs, government enforced legal monopolies all add to the cost of health care. If you can take care of all of your basic health care needs (which is doable with a deregulated health care system) your costs will be far less than they are now.

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