The CBO’s Cloudy Crystal Ball
As the saying goes, “It’s tough to make predictions, especially about the future.” But that hasn’t stopped the Congressional Budget Office (CBO) from trying. The CBO has forecast the effects of the House Republicans’ health care reform plan, the American Health Care Act (AHCA), which will repeal and replace much of President Barack Obama’s 2010 Affordable Care Act (ACA).
The CBO estimates that relative to current law projections, the AHCA will decrease the federal deficit by $337 billion and decrease premiums 10 percent in the non-group health insurance market over the 2017-2026 period. But the CBO forecast of the AHCA’s impact on insurance coverage has attracted the most attention. The CBO calculates that 14 million more people will be uninsured in 2018 than under current law. The figure rises to 21 million in 2020 and 24 million by 2026.
How good are the CBO’s predictions? No one doubts this was a good faith effort. The Congressional Budget Office is nonpartisan and has a deserved reputation for integrity. It acknowledges that how “affected parties would respond to the changes made by the legislation are all difficult to predict, so the estimates in this report are uncertain.” Yet the CBO’s estimates are likely inaccurate because it has consistently overestimated the effectiveness of the ACA’s individual mandate and its associated penalties in motivating uninsured people to obtain insurance, and continues to do so in this report.
In 2012 the CBO predicted that by 2017 an additional 28 million would gain health insurance. The actual figure is closer to 20 million. The CBO was even worse in estimating how people would gain or lose coverage. It forecast 25 million would gain coverage on the ACA exchanges and 10 million more would gain Medicaid coverage. Less than half as many people actually signed up on the exchanges and not all of them gained coverage -- many were replacing non-exchange policies they lost after ACA passage. Conversely, the CBO Medicaid prediction was too low. Nearly three-quarters of the 20 million new health care enrollees last year came from additional Medicaid enrollment (14.3 million in 2016). The CBO also predicted 5 million would lose employer coverage but employer provided insurance stayed relatively stable.
The CBO model assumes the mandate prompted people to enroll in the ACA health care exchanges and Medicaid. Most of the 14 million additional uninsured it predicts in 2018, “stem from repealing the penalties associated with the individual mandate.” But no one has documented how effective the mandate really was. A 2016 publication by economist and ACA architect Jonathan Gruber found that the mandate had no significant effect on ACA coverage gains. The mandate was undermined by lax enforcement of enrollment periods, excessive exemptions, and weak penalties. In 2016, 11 million people received exemptions from the mandate and 5.6 million paid the penalty rather than purchase insurance -- far more than the CBO projected.
The prediction of 14 million fewer insured in 2018 is suspect. The AHCA leaves in place the ACA’s subsidies for buying insurance until 2020. Since about 85 percent of people purchasing insurance on the ACA exchanges are receiving subsidies and will continue to do so until 2020, there is little reason to believe they would drop coverage in 2018. Similarly, the ACA Medicaid expansion will continue until 2020. Why would people who were motivated to enroll in Medicaid by the mandate drop coverage that they are receiving at no cost in 2018?
The CBO predicts that "reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment," adding that caps on enrollee eligibility and spending in some states would likely dissuade others form expanding the program, resulting in 14 million fewer Medicaid recipients by 2026. But most ACA Medicaid gains resulted from enrollment of people who were already eligible for Medicaid before the ACA Medicaid expansion. These people will continue to be eligible for no-cost Medicaid even after the AHCA ends Medicaid expansion funding in 2020. These pre-Medicaid expansion insureds would have no reason to drop coverage.
The new Medicaid enrollees who signed up under the ACA’s expansion of Medicaid eligibility will remain eligible under the AHCA. There is no reason these people would drop coverage. Some states may drop the expansion program since new expansion enrollees after 2020 will receive the matching rate other Medicaid enrollees in the state get -- the matching rate ranges from 50 to 75 percent depending on the state -- rather than the 90 percent under current law. But CBO admits, “How individual states would ultimately respond is highly uncertain.” And CBO’s prediction of 5 million in coverage losses from states “that would have expanded eligibility in the future” but fail to do so under the AHCA is speculative at best.
The CBO is on firmer ground in predicting coverage losses due to the AHCA’s transition from the current open-ended federal funding of Medicaid to a per-capita based cap on federal contributions to states based on the number of their Medicaid enrollees. CBO projects per-enrollee Medicaid spending would grow faster (by 0.6 percent) under current law than the annual adjustments allowed under the AHCA resulting in reduced federal spending over time. Unless states are willing to make up the shortfall, they would have to limit spending by lowering payments to providers, lowering enrollments, eliminating optional services, becoming more efficient, or -- as the CBO expects -- applying a combination of all these approaches.
The CBO was faced with a difficult, if not impossible, prognostic challenge. Its estimates should not doom passage of the AHCA, especially if budget neutral modifications like increasing the size of its tax credits for older enrollees coupled with lowering the upper cutoff for tax credit receipt can make insurance more affordable for those who need it most.
Joel Zinberg, M.D., J.D., F.A.C.S., a visiting scholar at the American Enterprise Institute, is a practicing surgeon at Mount Sinai Hospital and an associate clinical professor of surgery at the Icahn School of Medicine.