Democrats and much of the mainstream news media Wednesday poured cold water on the the House Republicans’ American Health Care Act, citing a report from the Congressional Budget Office that the legislation to begin dismantling Obamacare would result in 23 million uninsured in the next 10 years.
“The CBO was wrong when they analyzed Obamacare’s effect on cost and coverage, and they are wrong again,” Health and Human Services Secretary Tom Price countered in a statement.
“In reality, Americans are paying more for fewer health-care choices because of Obamacare, and that’s why the Trump administration is committed to reforming health care.”
House Republicans passed the bill three weeks ago without waiting for the CBO to release a score for the legislation. It replaced an earlier version of the AHCA that the CBO had said would result in 24 million being without insurance.
But the figures of those left without insurance, at least as widely reported, is misleading. It includes nine million already without coverage under Obamacare. The remaining 14 million are made up of those who could potentially lose coverage under the new bill, plus those who take advantage of the AHCA eliminating the mandate to purchase coverage. For the latter group, being allowed to remain uninsured is a positive option. The requirement to be covered under Obamacare or pay a penalty has been an unpopular feature of the present health law.
The criticism by Sen. Jeff Merkley, D-Ore., was typical:
“This devastating report confirms what we suspected: TrumpCare 2.0 is even worse than TrumpCare 1.0. No wonder House Republicans rushed to pass it before this report came out.
“This report confirms that once again, the House has championed a bill that would strip health care from more than 20 million Americans. In addition, millions more would buy policies that they think provide coverage but in reality are worth little more than the paper they are printed on.”
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Nonsense, said Rep. Tom MacArthur, co-author of the amendment that allowed the bill to pass. The moderate Republican came under fire from like-minded GOP members for working with the House Freedom Caucus to pass the overhaul.
“I’ll put my knowledge of the insurance market against CBO’s knowledge of the insurance market,” MacArthur said, noting he spent 30 years in the industry.
“I respect the CBO’s role but just because a group of auditors down the block has created a model that has a lot of ‘ifs,’ ‘ands’ and ‘maybes’ looking out 10 years doesn’t make that the gospel. That is somebody’s opinion at CBO. I have a different opinion,” he said.
He noted the CBO originally projected 22 million people enrolled in Obamacare exchanges by 2016, when in reality there were only 10 million. “They were off by 120 percent. That’s a staggering error,” MacArthur said.
Republicans counter critics by noting AHCA will reduce premiums by giving states and consumers more choices they can afford. States will be allowed to seek exemption from current rules that force prices upward. Insurance companies would not be required to provide policies with a minimum package of benefits. While subsidies will be eliminated, tax credits will be given to lower the out-of-pocket cost of insurance to consumers, including those who might otherwise choose to go without coverage, further stabilizing the market. The goal of the Republican plan is to broaden coverage by reducing costs and offering choices. Additionally, the AHCA is projected to result in a $119 billion reduction in the federal deficit.
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While the CBO “nonpartisan” score is treated like trump cards in debates over legislation, there is a long history of projections later being destroyed by reality.
In 2013, when Obama sought to reverse the George W. Bush tax cuts for the highest-income earners, CBO estimated the federal government would raise $650 billion over the next 10 years. Later, new projections had to be issued which forecast a decline in revenues of $4.2 trillion, due to CBO not taking into account what the higher tax rate would do to economic growth.
The CBO’s rosy score for Obamacare in 2010 went out the window in 2014 when CBO revised its forecast to account for 2.3 million fewer full-time jobs and a hit to the economy of $1.8 trillion over a decade – projections that likely would have prevented Obamacare from ever passing Congress had they been known in 2010.
Former House Speaker Newt Gingrich, a longtime critic, notes that the CBO does not score legislation dynamically. It ignores growth that results from tax cuts and the reduced growth that results from tax increases in its projections – a practice that fails to model reality and which “creates an inherent legislative bias toward more taxes and budget gimmicks.”
For example, Wednesday’s CBO projection did not model for states choosing to waive costly insurance regulations – a feature certain to lower premiums beyond that claimed in the report.
“The central flaw at the CBO is the agency does not utilize any kind of dynamic scoring,” said Gingrich in a March opinion piece. “It wrongly presumes that a change of fiscal policy will have no impact on labor, markets or other economic factors.”
Gingrich has proposed outsourcing the projections to three to five professional firms who understand the interaction between legislation and the marketplace, and letting them compete. Each year, the worst performer – including the CBO – would lose its contract.
“The credit-rating agencies that service financial markets could offer a useful model for obtaining better policy scores,” Gingrich argues. “We should consider replacing the CBO with a competitive system of multiple scoring agencies whose success depends on accuracy over time.”
The CBO was created in 1974 in the closing months of President Richard Nixon’s time in office to provide what the agency describes as “objective, impartial information about budgetary and economic issues.” Prior to the CBO law, executive-branch agencies provided cost estimates which often merely reflected the preferences of the administration. The CBO was as much a reaction to Nixon as it was an attempt at fiduciary responsibility, and served to shift power from the executive branch to Congress.
The present director of the CBO is Keith Hall, a former George W. Bush appointee to the Bureau of Labor Statistics. He began his four-year term as the ninth director of the CBO on April 1, 2015.