Wednesday, July 25, 2012

The Premature But Nevertheless Telling CBO Report on Obamacare

It has been nearly a month since the unfortunate Supreme Court ruling on Obamacare. Yesterday, the Congressional Budget Office (CBO) released their adjusted report on the costs of Obamacare. You're probably wondering why I call this report "premature." The reason for this is because the results and impacts of this legislation are more decentralized due to the Supreme Court's ruling on Medicaid. As I previously explained, the ruling has provided the states the option to a) not be coerced to expanding their Medicaid program, and b) the health care exchanges essentially need to be provided by the state in order for it to work most effectively. As the CBO report admits (p. 2), "what the states will be able to do and what they will decide to do are both highly uncertain," thereby postulating that "CBO and JCT's assessments in this analysis should not be viewed as representing a single definitive interpretation of how the ACD should or will be implemented in light of the Court's decision." In other words, by the CBO's own admission, being able to sufficiently do a cost-benefit analysis is premature.

In spite of that prematurity, we can still draw general conclusions from what will happen as a result of Obamacare.

The first has to do with the costs itself. Although those on the Left like to point out that the net costs had a downward adjustment of $84 billion, that's because in net terms, a million people are losing their insurance. Obama's promise was that everyone who has insurance will be able to keep it. The last CBO report on Obamacare (p. 4) estimated that there would be a net loss of 3-5 million who are insured by their employers. This report had an upward revision (Table 1; see below) on the effect of those who would receive insurance.

Nevertheless, I have to wonder: the federal government is spending billions of dollars that it doesn't have in order to set up these health care exchanges, and there are still 30 million people without insurance? And here I thought the bill was supposed to provide universal health coverage. I guess that was my mistake.

The price tag is still bothersome and only gets worse each time projections are made. This legislation is still going to cause a net increase of $1.168T (Table 2), which goes against Obama's promised $900B price tag. I don't understand where those on the Left, or even the CBO for that matter, have this idea that this is going to reduce health care costs. How does spending billions on health insurance exchanges with a de facto zero net effect on the uninsured going to save money?

Also, how does expanding a program that is running up costs (Medicaid 2011 Actuarial Report, 2011; p. 15) even faster than Social Security going to help at all? For one, the federal government is covering the Medicaid expansion 100% up until 2016, at which point the states have to cover 10%. The CBO report (p. 9) even admits that this can be problematic for states. Some states spend a good amount on Medicaid, which can be especially difficult for those already plagued with fiscal issues. Each state will face different incentives on whether 10% is too much or "worth it." There is also the issue of the "woodwork effect," which means that those who previously eligible will now be drawn out due to the publicity that this bill has received.

The health care exchanges and the Medicaid expansion are the two most expensive parts of Obamacare, which is why they have been receiving all this attention in the CBO reports. Neither one of these sub-policies has addressed the issue of neither health care quality nor spiraling health care costs (e.g., all we have done is disincentivized patients to be value-conscious shoppers because "someone else is paying the bill").

However, it does coerce citizens to "buy insurance or pay the tax." The CBO projects that about 4 million will opt for the latter because buying insurance is just too expensive, although enforceability of the tax is tenuous. Obamacare also does come with an array of new taxes. Who would have thought that "health care reform" meant more accountants over at the IRS? Obamacare does add to the federal deficit by $1.17T, which does wonders for our current debt situation. Don't forget adding to the increased dependency on government! Obamacare is also deterring doctors from actually wanting to practice, which is bad for a situation in which the number of doctors isn't growing in comparison to the increased demand (i.e., health care resources are even more scarce and waiting times will be even longer). What could be better for our health care system? And what's even better is that over time, we just find more unintended consequences within Obamacare.

The only thing that this report did for me was increase my hopefulness even more that either Obamacare can be repealed or that a majority of the states can undermine it by refusing to expand their Medicaid programs and build health care exchanges.


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