CBO Tries to Sink Tax Bill

The Congressional Budget Office [CBO] is back at it again, now providing class warfare material to opponents of tax reform.   CBO estimates played a significant role in the  several failed attempts by Republicans to repeal and replace Obamacare. Several Republican Senators appeared to be scared off by estimates of 20 million or more Americans who would lose coverage due to a particular variation of the repeal/replace effort. 

Republican efforts on tax reform are always attacked by Democrats as disproportionately benefitting the wealthy and hurting the poor.  This week the CBO made a new argument, that the provision in the Senate bill that would repeal the mandate to purchase health insurance will mean that 13 million people will lose coverage.

Think about this one for a moment. The mandate to purchase health insurance is a tax (according to the Supreme Court) that will be paid for failure to have coverage.  The mandate does not require one to purchase coverage, through signing up on the exchanges or signing up for Medicaid, but merely assesses a penalty for failure to do so. In other words, if someone has been hit by the penalty in the past few years, it is for making a personal decision to not get coverage.

What happens if the mandate is withdrawn? If someone at that point chooses not to obtain coverage, again, it is due to a personal choice, not any action by government that denies coverage to someone. 

The CBO believes that without the mandate, 13 million fewer people will have coverage, many of them low income people. If this number were accurate, it would be due to decisions by 13 million people not to get coverage, not to any action by any governmental body to deny coverage to them. The semantic distinction is important: if the perception is Republicans are taking coverage away from people, particularly poor people, it looks a lot worse than people simply choosing not to buy coverage on the exchanges.

The reality is the 13 million number is absurd. At the moment between 9 and 10 million people have coverage on the exchanges. This number has been steadily declining since the program began in October 2013. Most of those covered on the exchanges are older and sicker and qualify for generous subsidies. Most of those who pay the penalty are younger and healthier.  Why exactly would people who are older and sicker choose not to be covered because the mandate (pay a penalty for failure to be covered) were removed? 

How can 13 million fewer be covered without a mandate when only 9-10 million are now signed up on the exchanges? This last question is easier to answer -- CBO expects that the program as currently run, with the mandate, will grow and double in size the next five years.  Of course, CBO originally estimated that 21 million would be covered on the exchanges by 2016 in their estimates when the bill was first passed in 2010, and then slightly higher at 22 million, when the program was first implemented 3 years later. I guess if you get it wrong by a factor of two the first two times you tried to estimate this, you might as well carry forward the error to the future. 

Of course, CBO might also argue that current Medicaid enrollees might drop participation in that program without the mandate. How realistic would that be that the poorest Americans would give up a free health insurance to have no coverage?

The reality is that the mandate had much less impact on individual behavior than the politicians and bureaucrats who devised the program anticipated. Those who believe in the power and wisdom of central planners always think they can predict consumer behavior. The fact that 30 million people are still uninsured today suggests that Obamacare was a boon mainly to the poor or near poor or the chronically ill. They signed up for either Medicaid or the exchanges.  But pretty much everyone else was either turned off by high prices on the exchanges (designed to be cheaper for the elderly and more costly than actuarial tables would suggest for younger people), or unfazed by the penalty to be paid for non-coverage. 

Since most people who have signed up are lower income, if you estimate losses in coverage due to removal of the mandate, of course, most of them will be lower income people. The reality is that there is no basis for thinking those currently insured will drop coverage without the mandate, just as there is no basis for assuming the exchanges will grow substantially at this point with the mandate in place.

What you see with the CBO scoring is politics at work. 

 Richard Baehr is cofounder of American Thinker.

The Congressional Budget Office [CBO] is back at it again, now providing class warfare material to opponents of tax reform.   CBO estimates played a significant role in the  several failed attempts by Republicans to repeal and replace Obamacare. Several Republican Senators appeared to be scared off by estimates of 20 million or more Americans who would lose coverage due to a particular variation of the repeal/replace effort. 

Republican efforts on tax reform are always attacked by Democrats as disproportionately benefitting the wealthy and hurting the poor.  This week the CBO made a new argument, that the provision in the Senate bill that would repeal the mandate to purchase health insurance will mean that 13 million people will lose coverage.

Think about this one for a moment. The mandate to purchase health insurance is a tax (according to the Supreme Court) that will be paid for failure to have coverage.  The mandate does not require one to purchase coverage, through signing up on the exchanges or signing up for Medicaid, but merely assesses a penalty for failure to do so. In other words, if someone has been hit by the penalty in the past few years, it is for making a personal decision to not get coverage.

What happens if the mandate is withdrawn? If someone at that point chooses not to obtain coverage, again, it is due to a personal choice, not any action by government that denies coverage to someone. 

The CBO believes that without the mandate, 13 million fewer people will have coverage, many of them low income people. If this number were accurate, it would be due to decisions by 13 million people not to get coverage, not to any action by any governmental body to deny coverage to them. The semantic distinction is important: if the perception is Republicans are taking coverage away from people, particularly poor people, it looks a lot worse than people simply choosing not to buy coverage on the exchanges.

The reality is the 13 million number is absurd. At the moment between 9 and 10 million people have coverage on the exchanges. This number has been steadily declining since the program began in October 2013. Most of those covered on the exchanges are older and sicker and qualify for generous subsidies. Most of those who pay the penalty are younger and healthier.  Why exactly would people who are older and sicker choose not to be covered because the mandate (pay a penalty for failure to be covered) were removed? 

How can 13 million fewer be covered without a mandate when only 9-10 million are now signed up on the exchanges? This last question is easier to answer -- CBO expects that the program as currently run, with the mandate, will grow and double in size the next five years.  Of course, CBO originally estimated that 21 million would be covered on the exchanges by 2016 in their estimates when the bill was first passed in 2010, and then slightly higher at 22 million, when the program was first implemented 3 years later. I guess if you get it wrong by a factor of two the first two times you tried to estimate this, you might as well carry forward the error to the future. 

Of course, CBO might also argue that current Medicaid enrollees might drop participation in that program without the mandate. How realistic would that be that the poorest Americans would give up a free health insurance to have no coverage?

The reality is that the mandate had much less impact on individual behavior than the politicians and bureaucrats who devised the program anticipated. Those who believe in the power and wisdom of central planners always think they can predict consumer behavior. The fact that 30 million people are still uninsured today suggests that Obamacare was a boon mainly to the poor or near poor or the chronically ill. They signed up for either Medicaid or the exchanges.  But pretty much everyone else was either turned off by high prices on the exchanges (designed to be cheaper for the elderly and more costly than actuarial tables would suggest for younger people), or unfazed by the penalty to be paid for non-coverage. 

Since most people who have signed up are lower income, if you estimate losses in coverage due to removal of the mandate, of course, most of them will be lower income people. The reality is that there is no basis for thinking those currently insured will drop coverage without the mandate, just as there is no basis for assuming the exchanges will grow substantially at this point with the mandate in place.

What you see with the CBO scoring is politics at work. 

 Richard Baehr is cofounder of American Thinker.

RECENT VIDEOS