March 13, 2017

And the Winner is...The Deficit

Some politicians have said that the nonpartisan congressional Budget Office and their numbers a bunch of hooey, that the numbers can't be trusted, that these folks are always wrong. First, there’s Sean Spicer.
If you're looking at the CBO for accuracy, you're looking at the wrong place. Look at what the CBO's record is on Obamacare. It's vastly off. They're way off in terms of the millions.  

And then there’s  HHS Secretary Tom Price:
We believe that the plan that we're putting in place will ensure more individuals than are currently ensured SO we think that the CBO simply has it wrong. It's just not believable, is what we would suggest.  
Unless of course they like the numbers, as Speaker Paul Ryan seems to, in which case the CBO folks are rocket scientists who know this stuff (whatever this stuff is) like the back of their hand.
This report confirms that the American Health Care Act will lower premiums and improve access to quality, affordable care. CBO also finds that this legislation will provide massive tax relief, dramatically reduce the deficit, and make the most fundamental entitlement reform in more than a generation...
So, rather than listening to them, let's just read what  the report says: (emphasis added)

CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017-2026 period. That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion over the period, and revenues would be reduced by $0.9 trillion.

The largest savings would come from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance. The largest costs would come from repealing many of the changes the ACA made to the Internal Revenue Code—including an increase in the Hospital Insurance payroll tax rate for high-income taxpayers, a surtax on those taxpayers’ net investment income, and annual fees imposed on health insurers—and from the establishment of a new tax credit for health insurance.

CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.

Later, following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026. The reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment—because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped.

In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.

The report further notes the following “uncertainty surrounding the estimates” saying that CBO and JCT considered the potential responses of many parties that would be affected by the legislation, including these:
  • Federal agencies—which would need to implement major changes in the regulation of the health care system and administration of new subsidy structures and eligibility verification systems in a short time frame;
  • States—which would need to decide how to use Patient and State Stability Fund grants, whether to pass new laws affecting the nongroup market, how to respond to the reduction in the federal matching rate for certain Medicaid enrollees, how to respond to constraints from the cap on Medicaid payments, and how to provide information to the federal government about insurers and enrollees;
  • Insurers—who would need to decide about the extent of their participation in the insurance market and what types of plans to sell in the face of different market rules and federal subsidies; 
  • Employers—who would need to decide whether to offer insurance given the different federal subsidies and insurance products available to their employees;
  • Individuals—who would make decisions about health insurance in the context of different premiums, subsidies, and penalties than those under current law; and
  • Doctors and hospitals—who would need to negotiate contracts with insurers in a new regulatory environment. 
Each of those responses is difficult to predict. Moreover, the responses would depend upon how the provisions in the legislation were implemented, such as whether advance payments of the new tax credits were made reliably. And flaws in the determination of eligibility, for instance, could keep subsidies from people who were eligible or provide them to people who were not.

So, in the end, all things being equal, the deficit goes down by $337B over ten years, so the plan is a winner. In the process, the big government mandate is lifted; taxes go down; spending goes down; and if in the process a few million more people lose their health insurance, that's a small price to pay for a Republican lawmaker.

We'll see what happens once people have a chance to read the report and see how they think they can sell it to their constituents, particularly in the Senate where there has been, at least so far, less love for the plan.