The Congressional Budget Office’s scoring of the Senate Republicans’ initial health-care proposal fueled Democrat complaints that the GOP is heartlessly stripping millions of their insurance plans.
Now, Senate Majority Leader Mitch McConnell says he will send a revised bill to the CBO next week for scoring, apparently hoping to trim the CBO’s estimate that more than 22 million Americans would lose their health insurance in the next 10 years if the legislation passed in its current form. House Republicans passed their own version three weeks ago without waiting for a CBO score. It replaced an earlier version the CBO had said would result in 24 million being without insurance.
But critics of the CBO — described as a bipartisan federal agency within the legislative branch that provides budget and economic information and assessment to Congress — wonder why a Republican Congress would allow a group with a history of inaccurate forecasts that typically fail to account for the impact of market forces. And some have called for the agency to be disbanded or replaced.
The CBO, founded in 1974 under President Nixon, also estimated the initial Senate Republican health-care bill will cut the federal deficit by $321 billion by 2026. Premiums, which have more than doubled for most Americans since Obamacare was enacted in 2010, would be 30 percent lower in 2020 than they would be without reform, according to CBO.
Former House Speaker Newt Gingrich has proposed outsourcing the projections of budget legislation to three to five professional firms that understand the interaction between legislation and the marketplace.
He wants them to compete against each other, and the worst performer, including the CBO, would lose its contract.
Gingrich argues the CBO does not score legislation dynamically. It ignores growth that results from tax cuts and the reduced growth that results from tax increases in its projections.
Failing to model reality, he contends, the CBO “creates an inherent legislative bias toward more taxes and budget gimmicks.”
For example, the CBO’s projection last week of the Senate bill did not model for states choosing to waive costly insurance regulations, a feature certain to lower premiums beyond the amount claimed in the report.
“The central flaw at the CBO is the agency does not utilize any kind of dynamic scoring,” said Gingrich in a March opinion piece for FoxNews.com. “It wrongly presumes that a change of fiscal policy will have no impact on labor, markets or other economic factors.”
Gingrich argues credit-rating agencies that service financial markets “could offer a useful model for obtaining better policy scores.”
“We should consider replacing the CBO with a competitive system of multiple scoring agencies whose success depends on accuracy over time,” he wrote.
Prior to the CBO law, executive-branch agencies provided cost estimates that often merely reflected the preferences of the administration. The CBO was as much a reaction to Nixon as it was an attempt at fiduciary responsibility, serving to shift power from the executive branch to Congress.
The present director of the CBO is Keith Hall, a former George W. Bush appointee to the Bureau of Labor Statistics. He began his four-year term as the ninth director of the CBO on April 1, 2015.
History of bad projections
While the CBO “nonpartisan” score is featured in debates over legislation, there is a long history of projections that turn out to be wildly inaccurate.
In 2013, when Obama sought to reverse the George W. Bush tax cuts for the highest-income earners, CBO estimated the federal government would raise $650 billion over the next 10 years. Later, new projections had to be issued that forecast a decline in revenues of $4.2 trillion, due to CBO not taking into account the negative impact of the higher tax rate on economic growth.
The CBO’s optimistic score for Obamacare in 2010 was abandoned in 2014 when CBO revised its forecast to account for 2.3 million fewer full-time jobs and a hit to the economy of $1.8 trillion over a decade. If that projection had been made in 2010, Obamacare likely would not have passed Congress.
The reaction in Congress to the CBO scoring of the current Senate health-care bill reflects the cynicism many Republicans have toward the agency’s work.
When Democratic senators such as Jeff Merkley of Oregon touted the “devastating” CBO report showing Republicans “would strip health care from more than 20 million Americans,” Rep. Tom MacArthur, R-N.J., who spent 30 years in the health-insurance industry, pushed back.
“I’ll put my knowledge of the insurance market against CBO’s knowledge of the insurance market,” MacArthur said.
“I respect the CBO’s role, but just because a group of auditors down the block has created a model that has a lot of ‘ifs,’ ‘ands’ and ‘maybes’ looking out 10 years doesn’t make that the gospel,” he said.
“That is somebody’s opinion at CBO. I have a different opinion,” MacArthur said.
He noted the CBO originally projected 22 million people enrolled in Obamacare exchanges by 2016 when in reality there were only 10 million.
“They were off by 120 percent. That’s a staggering error,” MacArthur said.
Republicans also argue their bill would reduce premiums by giving states and consumers more choices they can afford. States would be allowed to seek exemption from current rules that force prices upward, and insurance companies would not be required to provide policies with a minimum package of benefits.
The concern that the CBO doesn’t take free-market implications into account is shared by a policy expert with the Heartland Institute, an Illinois-based free-market think tank.
With the mandate lifted, many will choose not to have insurance, argues Peter Ferrara, Heartland’s senior fellow for entitlement and budget policy.
“Think of the logic behind saying the bill is causing the uninsured to increase by liberating people from the coercive mandate to buy it — which is what the American people want,” he said.
“Are those uninsured the result of the bill, or the result of decisions people are liberated to make in the market?”
He explained that most of the rest of the uninsured in the CBO score stem from reversal of the Obamacare Medicaid expansions, which is the foundation for the trillion dollars in spending saved under the Republican bill.
“Studies show health outcomes for those on Medicaid are no better than for those who are uninsured,” Ferrara argued.
“Instead of coercion to buy insurance the uninsured do not want to buy, or wasting more trillions on Medicaid, policy should be focused on lowering premiums and expanding choice,” he said.
Michael Hamilton, Heartland’s research fellow for health-care policy, opposes the Senate bill, charging it aims to repair, not replace Obamacare.
He said the CBO score, along with most of Congress, “perpetuates the myth that having insurance implies having access to affordable health care.”
“Obamacare insurance is too expensive to use. Many stand to gain by losing their Obamacare coverage,” he said. “People could buy better, cheaper health care by ceasing to use health insurance to pay for non-catastrophic care.
“Unfortunately, most Democrats and too many Republicans insist on making insurance central.”
Republicans, indeed, ran in 2016 on repealing Obamacare “root and branch.” Sen. Rand Paul, R-Ky., has called the Senate bill “Obamacare-lite,” and Sen. Mike Lee, R-Utah, called it “far short of repeal,” contending it “keeps the Democrats’ broken system intact.”
With opposition from both conservative and moderate Republican senators leading Senate Majority Leader Mitch McConnell to delay bring the bill to the floor, Sen. Ben Sasse, R-Neb., urged President Trump to consider a new strategy, National Review reported.
In a letter Friday, he suggested that if the Senate can’t come to an agreement after next week’s July 4 recess, the Republicans should fully repeal Obamacare through reconciliation and then work on a repeal plan. He proposed canceling the August recess to do the work.
“You campaigned and won on the repeal of Obamacare,” Sasse wrote to Trump. “So did every Republican senator. We should keep our word.”
Sasse said he fears a compromise replacement bill would merely attempt to “prop up much of the crumbling Obamacare structures.”
Trump apparently is on board, tweeting later Friday morning: “If Republican Senators are unable to pass what they are working on now, they should immediately REPEAL, and then REPLACE at a later date!”