The Congressional Budget Office (CBO) on Thursday released an estimate of the House Republican bill to fully repeal Obamacare. It found that doing so would increase the deficit by $230 billion.
This latest uncertain estimate should be taken with a trillion grains of salt, and Republicans would be foolish to place too much faith in it, for five reasons.
1. It reminds us of what we already knew. The health care law is full of budget gimmicks, and even if CBO is right about its fiscal impact, we can’t afford it because Uncle Sam is broke.
2. Nothing meaningful has changed. The Thursday estimate, shifting the budget window from 2010-19 to 2012-21, finds a 10-year savings of $230 billion, compared to $143 billion in the estimate from last March.
We can compare apples to apples by looking only look at the 2010-19 period in both estimates. Doing so, we see the new savings figure is almost identical to the old one: $145 billion, compared to $143 billion.
3. The numbers are quite soft. Budget numbers swing up and down all the time. For example, just between March and August of 2010, CBO's baseline deficit projection for the year 2016 grew by $64 billion and its 10-year (2010-2019) deficit projection grew by $193 billion. That’s a lot of play in the joints. A similar swing in the next few months would swamp this current “official” estimate.
4. CBO has warned us not to over-rely on its numbers for Obamacare. Back in March, the agency was extremely tentative in its prediction that passing Obamacare would produce any savings, and refused to make any specific prediction beyond the law’s first decade. In today’s estimate, CBO says, “The projections of the bill’s budgetary impact are quite uncertain" and "have a roughly equal chance of turning out to be too high or too low."
If just one of CBO’s many rosy assumptions is wrong, the bill won’t save a dime. To take just two examples:
• Medicare’s own independent actuaries have publicly warned that Obamacare’s unrealistic "productivity" cuts to hospitals are very unlikely to happen. Those cuts are projected to “save” $233 billion, while the repeal bill allegedly “costs” $230 billion. Upshot: If the Medicare experts are right on just that one point, repealing Obamacare will have no cost whatsoever.
• CBO assumes only 19 million workers will be dumped by their employers into the government exchanges in 2019, when there will be 111 million workers in the pool of potential “dumpees.” Douglas Holtz-Eakin, a former CBO director, thinks that’s way too optimistic. He predicts 35 million workers will be dumped. If so, it would add another trillion dollars to the law’s costs.
5. History shows health care bills invariably cost more than the official estimates at the time of enactment — usually a lot more. Some famous examples:
• Britain's National Health Service cost 38 percent more than projected in its first year.
• Romneycare in Massachusetts cost 20 percent more than projected in its first full year.
• Medicare's kidney dialysis program, created in 1972, cost 2.3 times as much as projected in its first year.
• In 1965, Medicare was projected to cost $12 billion by 1990. Its actual 1990 cost: $110 billion — roughly nine times the original estimate. (The comparable figures for Medicare’s first decade, 1966-75, are: $2 billion and $14.8 billion, respectively — seven times the original estimate.)
(Source: Joint Economic Committee, Republican Staff, "Are Health Care Reform Cost Estimates Reliable?" July 31, 2009.)
Now, for fun, what if we applied that first-10-year Medicare error ratio of roughly 700 percent to Obamacare?
If we did, we’d have a first-10-year cost of not $1.3 trillion but $9.1 trillion. Ah, you say, 700 percent seems outlandishly high (even though that’s what actually happened with Medicare). OK, fine, let’s assume the program will only cost twice the official estimate (200 percent). That would be a cost of $2.6 trillion, or an over-run of $1.3 trillion. Still seem too high? How about a 50-percent over-run ($1.95 trillion, $650 billion over budget). Still too high?
OK, how about a mere 10-percent cost over-run. In that case, the law will cost $1.43 trillion, or “only” $130 billion “over budget.”
That, of course, would eliminate almost all of CBO's $145 billion in estimated savings.
In the light of this history, and math, does 10 percent seem like an unreasonable cost over-run percentage for a massive new government health care program?
Does anybody really believe Obamacare cost estimates will turn out to have been too high?
Don’t be scared, Republicans. History’s on your side on this one.
Dean Clancy Legislative Counsel and Vice President, Health Care Policy for the grassroots organization FreedomWorks