Here's how badly the CBO missed with its 2009 predictions about ObamaCare

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Published by: Dan Calabrese on Tuesday March 14th, 2017

So while the media will treat their scoring of ACHA as unassailable clairvoyance, the rest of us shouldn't.

Here in Detroit we have a company called J.D. Power & Associates. You've probably heard them mentioned on car commercials. They give out awards for "automotive quality," which is about as subjective a notion as anything can be. But they've done a very good job convincing people that when they say something on the subject, it's authoritative, even though there is no reason to think it really is.

So just about every car company wants you to know about the awards they've won from J.D. Power & Associaties. These awards mean absolutely nothing because J.D. Power is just one group of people that makes subjective judgments about things. But because what they say is treated like a big deal, it feels like a big deal, and people respond to it as though it's a big deal.

The Congressional Budget Office is sort of like that. The CBO consists mainly of Keynesian economists who apply static analysis to every economic proposal when they "score" it. Since they embrace the primary assumptions of both the Democratic Party and the news media, their pronouncements are treated as if they are the word of God Himself.

So the big news today is the CBO's prediction that the Republican replacement for ObamaCare will increase the number of uninsured by more than 20 million. Democrats and the media are treating this as if it is an ironclad lock to happen because the Keynesians at the CBO say it's going to happen, while they ignore the part of the CBO's score that sees the deficit falling by more than $30 million a year.

But should any of this be taken seriously? If you'll recall, the CBO also "scored" ObamaCare back in 2009. Today we can look back at its projections and judge their accuracy. And the result is not too impressive:

But there are more than a few reasons to doubt CBO’s fortune-telling, especially in health care. Precisely because its models give too much weight to government coercion and too little to free markets, its projections have often missed the mark.

In February 2013, CBO predicted that ObamaCare enrollment in the individual market would be 13 million in 2015, 24 million in 2016 and 26 million in 2017. The actual enrollment for those years were, respectively, 11 million, 12 million and 10 million. As recently as March 2016, CBO was projecting an enrollment boom of 15 million for this year.

CBO also failed to predict how many people would game ObamaCare’s insurance rules and mandates, signing up for coverage just before they need expensive procedures like knee replacements then dropping coverage. On paper they shouldn’t behave that way, but the real world works differently than CBO’s models.

CBO was also badly wrong about the 2003 Medicare prescription drug benefit, which unlike ObamaCare used incentives, markets and private competition to control public costs. The drug benefit cost about 40% less over its first decade than CBO projected.

On top of this, the CBO even admits in its score of the AHCA that most of those going from insured to uninsured will be doing so because of the end of the individual mandate. In other words, they're going to become uninsured by choice. They only reason they're buying insurance now is because they're threatened with a fine if they don't. Whether they prefer not to buy it because they don't think they can afford it, or because they don't think it's a good value (and for many people, both are true), the fact remains that fewer people buying a product they don't want to buy is not bad news.

But there are other problems with the CBO's score. One is that it assumes nothing else will change in insurance markets after the bill passes. This is classic CBO, by the way. Laws are passed for the purpose of changing things. The CBO scores the bill as if nothing will change in terms of how people behave and how markets work.

GDP growth for Obama's final year? A measly 1.6 percent

Another problem with the CBO's scoring here is that it assumes Phase 1 of a planned three-phase process is the only thing that's ever going to happen. It's one thing to say they can't assume selling insurance across state lines and other things that are set for Phase 3, because that's going to be a bill that will need 60 votes in the Senate to pass. It might neve pass.

But Phase 2 simply involves the reversal by HHS Secretary Tom Price of a whole host of regulations Without knowing exactly what regulatory changes Price will make, how can CBO be sure that it's projections are accurate? It can't. It's basically making a wild guess at this point.

Yet that wild guess is being treated as a guaranteed sure thing by the political class, because as it always does, the CBO bases its "score" on left-wing economic assumptions about spending, taxation, incentives and markets.

That doesn't mean there are no problems with this bill. There are. But that has little if anything to do with the CBO, despite the way official Washington genuflects whenever it speaks from on high.

Dan's new novel, BACKSTOP, is a story of spiritual warfare and baseball. Download it from Amazon here!