Tuesday, July 18, 2017

The CBO and its big lie - Howard J. Warner

by Howard J. Warner

So how has their analysis fared so far? Should we expect any better results in the future?

As the CBO studies the revised Senate healthcare reform bill, both sides of this debate await their prognostication regarding the economics and numbers of covered individuals. Their analysis may provide cover for the difficult political decisions that the spineless Republicans will make regarding any reform legislation. Already, the Washington Post is calling its analysis “fake news” as it fears its analysis will improve the prospects of passage of a revised Senate bill.

The CBO was created to allow Congress an analysis of legislative costs independent of the OMB analysis. The OMB, which can be subject to the political whims of the president and the White House, has often missed the mark on costs and outcomes. Duplication of these services has occasionally provided more accurate calculations. By no means does duplication guarantee cost analysis that is accurate; most often their calculations (as the OMB’s) err on the low side. 

The Obama administration sought to use the CBO (which tends toward more progressive assumptions) to justify its Affordable Care Act via its guarantee of higher numbers of Americans covered via ObamaCare, as compared to the previous state-managed private insurance system. At the time, the Democrats controlled both chambers of Congress and they believed that the CBO would favor the more liberal line on the ACA. Unfortunately, their analysis is little better than dart-throwing contests. This is because their assumptions fail to understand human behavior.

Basic economic theory teaches us that human behavior can be influenced by certain financial rewards or thwarted by reversal of those benefits. If you subsidize certain activities through financial incentives then more people will attempt them; meanwhile penalizing those activities will reduce that behavior. Such is the case in purchasing healthcare insurance, despite is somewhat inelastic quality. 

Failure to understand that the rapidly increasing insurance premiums will force many to forgo this expense and pay a lower cost tax penalty underscores the inaccurate assumptions used by the CBO. They assume that the ObamaCare’s individual mandate acts as a stronger encouragement to purchasing medical insurance. This defies logic. After all, the ACA allows anyone to purchase insurance (after an illness is found) without any waiting period and without any subsequent penalty. Perhaps they did not understand the legislation?

So how has their analysis fared so far? Should we expect any better results in the future? By 2017 the CBO predicted that over 18 million people would purchase healthcare through the national and state exchanges. However, this year only 10.5 million did so. An error rate of close to 50% is hardly a good analysis. Throwing darts is more likely to get you the correct result, with any skill. How about their financial analysis? That is no better as they originally predicted federal costs of $0.9 trillion in ten years and so far this number is significantly higher; latest estimates exceed $2.6 trillion and growing. At this rate, we will not have to worry about the $20 trillion debt as it will be eclipsed in a few years.

Further, the CBO has failed to include any accurate calculation regarding lost jobs through the business mandate or jobs converted to part-time to avoid the mandate which kicks in at 50 full-time employees. This real cost has stunted our national economic growth, which increases our deficit through lower tax receipts and lower productivity. Businesses seek to automate their processes to avoid this higher cost of employees. The increased cost of healthcare premiums also impacts the pay of employees as the total package must be calculated by employers. Lack of such simple economic principles demonstrate the limited utility of any CBO analysis as politicians seek cover. 

The mainstream press will never accept any market-based insurance as it seeks nationalization of medical care and a single payer approach favored by the political left. This is done despite the shortcomings evident in the Baby Charlie Gard case. Canadian medical death rates for most adult diseases is different from those of the USA despite similar demographics; lifestyle differences are not included in these analyses.

Quality care cannot be purchased on the cheap, another missed aspect of the CBO reporting. Further, a vast majority of medical innovations originate within the American university centers that depend upon federal research dollars, private insurance funds and government provided insurance monies. Obamacare significantly altered this funding by restricting the per capita procedure reimbursements.

Beyond this, the CBO fails to calculate coverage by individuals that purchase higher deductible policies fully since ObamaCare mandated coverage by insurance companies is limited under such policies. This kind of slanted analysis demonstrates a liberal and expanded governmental bias in the CBO calculations. The press reports of these issues are woefully misleading and a disservice to the public. 

The CBO estimates that by 2026, 23 million fewer people will have insurance under the House bill (at $119 billion savings) while 22 million fewer will be covered under the first Senate bill (and a $321 billion savings). If they could not get the estimate correct by 2017 (only six years after the ACA went into effect), then what makes one believe they are any more skilled at 10 years henceforth? Why are we so concerned with their estimate for the newer Senate bill? Because the politics underlying the weak-kneed and waffling republicans is precarious. Further, any federal savings can be used to enrich the tax reform legislation they have also promised.

The CBO has provided information as requested despite any credible expertise in healthcare legislation. Herein, this effort demonstrates the lie. The CBO scores legislation despite an ability to provide accurate information for legislators. Often, they are the excuse for sought political cover for ideological over substantial decisions made by both sides of any issue.

Howard J. Warner

Source: http://www.americanthinker.com/articles/2017/07/the_cbo_and_its_big_lie.html

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