Is Obamacare Financially Sound? The Truth is Hidden

We can’t tell if Obamacare is financially sound if the government is no longer tracking its finances.

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Yesterday, I wrote about a Washington Times report that the CBO was predicting massive price hikes for insurance that was offered through the Federal exchange or through the state exchanges. The story also gave the CBO’s spin in favor of the law:

Overall, the CBO said, health care costs for the government and for private consumers are lower than expected just a few years ago. That means Obamacare is less expensive than predicted when the Affordable Care Act was enacted in 2010, though it’s covering fewer Americans than President Obama hoped.

Here is what you always have to keep in mind now when the CBO gives you good news about Obamacare: They have deliberately stopped scoring the whole law. They claimed it was too complicated to do so and they had to give up.

The Hill reported this back in June: “CBO throws in the towel on scoring ObamaCare.”

In a little-noticed footnote from April, the Congressional Budget Office (CBO) said it will continue to assess the effects of the law’s exchange subsidies and the Medicaid expansion, while not tracking others.

“The provisions that expand insurance coverage established entirely new programs or components of programs that can be isolated and reassessed,” the office wrote.

“In contrast, other provisions of the Affordable Care Act significantly modified existing federal programs and made changes to the Internal Revenue Code.

“Isolating the incremental effects of those provisions on previously existing programs and revenues four years after enactment of the Affordable Care Act is not possible.” 

What this now means, as Megan McArdle explains at Bloomberg, is we really don’t know how Obamacare is affecting the budget.

The insurance coverage provisions, it thinks, will actually cost more than $100 million less than expected, thanks to a number of changes: slower overall growth in health-care costs; the decision by insurers to offer cheaper “narrow network” exchange plans with a reduced selection of doctors and facilities; and revisions to assumptions about everything from how many people were on Medicaid before the law took effect to how many people will lose their employer-sponsored insurance thanks to the law.

On the revenue side, however, it is mostly silent. And we’ve seen some slippage on the revenue side: For example, the Barack Obama administration has so far been reluctant to implement the required cuts to the Medicare Advantage program, which were a major revenue source under the original law.

Does that mean Obamacare isn’t generating more deficit reduction than predicted? No. The lower insurance costs are great news for the federal budget. But you can’t get that out of this analysis — or any other analysis, I fear, because the CBO has stopped scoring the law as a whole. We should be glad to learn that the CBO thinks we’ll be spending less on subsidies. But we shouldn’t put more weight on that statistic than it can actually bear.

I know that every once in a long while the government accidentally gets competent for a time. But if I were a gambler I would consider it a safe bet to predict that the government is not collecting enough revenue to cover the expense of Obamacare. In fact, I suspect that is why the CBO didn’t want to continue to report on the entire law.

When you hear that the law is working out better financially than expected, remember that the report only covers some, not all of the relevant information.