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March 23, 2017

The White House slammed CBO for 'a history of inaccuracy.' Is that fair?

Daily Briefing

Editor's note: This story was updated on June 27, 2017, to reflect legislative developments and CBO's score of the Senate health care legislation.

By Sam Bernstein, Senior Staff Writer

The Senate GOP's effort to repeal and replace the Affordable Care Act is expected to come down to the wire—in part because of the Congressional Budget Office's (CBO) "score" of the legislation, which projected it would increase the number of uninsured Americans by 22 million.

But just what is CBO, and why do lawmakers care about its scores so much? Here are key questions and answers about Congress' so-called "scorekeeper."

What does CBO actually do?

CBO projects the likely consequences of major pieces of legislation by looking at their text, economic forecasts, and behavioral modeling. For instance, it estimates bills' effects on the budget and other relevant measures, such as insurance coverage.

Any CBO analysis starts with a close reading of the legislation being scored. CBO's experts then try to model a bill's future effects by reviewing data collected by federal statistical agencies and private organizations. The agency also consults with outside experts from academia, think tanks, the private sector, the federal government, and state and local governments.

When CBO projects a bill's effects into the future, it generally assumes there will be no further changes to existing laws or the bill under consideration. Moreover, it bases its projections on a set of predicted economic indicators such as GDP growth and inflation. Deviations from those economic assumptions can have a major effect on whether CBO's scores wind up resembling reality.

What did CBO say about the Senate GOP plan to replace the ACA?

CBO on Monday released a controversial score of a draft of the bill—called the Better Care Reconciliation Act (BCRA)—finding that the legislation in part would:

  • Increase the number of uninsured Americans by 22 million by 2026, including 15 million in 2018 alone;
  • Decrease federal funding for Medicaid by $772 billion across the next decade; and
  • Reduce federal budget deficits by $321 billion between 2017 and 2026.

The estimated effect on insurance coverage broadly parallels CBO's estimate for the earlier, House-passed version of the bill, which found that 23 million fewer people would have health insurance by 2026 than under current law. The House-passed bill, however, would have reduced deficits by a smaller amount—about $119 billion over 10 years, according to CBO.

How are lawmakers and the White House reacting to CBO's score?

Some Republican lawmakers and members of the Trump administration say CBO's estimates are not reliable. In a statement, the White House said, "The CBO has consistently proven it cannot accurately predict how health care legislation will impact insurance coverage. This history of inaccuracy, as demonstrated by its flawed report on coverage, premiums, and predicted deficit arising out of Obamacare, reminds us that its analysis must not be trusted blindly."

But Democrats and some Republicans said the CBO score should give lawmakers pause about supporting the BCRA. Sen. Lindsey Graham (R-S.C.) said, "If you were on the fence, you were looking at this as a political vote, this CBO score didn’t help you." And Sen. Susan Collins (R-Maine) said on Twitter that she wants "to work w/ my GOP & Dem colleagues to fix the flaws in ACA," but that the "CBO analysis shows Senate bill won't do it."

Meanwhile, Senate Minority Leader Chuck Schumer (D-N.Y.) offered a harsher assessment: "Republicans would be wise to read it as a giant stop sign," he said. "No matter how the bill changes around the edges, it is fundamentally rotten at the center."

So how accurate were CBO's original coverage estimates for the ACA, anyway?

Seven years later, the CBO's March 2010 projections for ACA coverage can be considered either reasonably accurate or completely off the mark, depending on your perspective.

In terms of total coverage, CBO was off by a bit. It projected that there would be 26 million uninsured nonelderly Americans in 2015; according to the Kaiser Family Foundation's analysis of Census data, there were about 28.5 million uninsured nonelderly Americans that year.

However, as you can see from the chart below, CBO was off substantially in terms of how people gained coverage—expecting many more people to gain coverage from the exchanges and many fewer from Medicaid and CHIP.

How CBO's March 2010 projection held up, by coverage type

Brian Blase, a senior fellow at George Mason University's Mercatus Center, said CBO overestimated exchange enrollment in part because the agency overestimated how effective the individual mandate would be at getting "relatively healthy people with middle class income to buy coverage in the exchanges."

As for CBO's underestimate of Medicaid and CHIP enrollment, recent research by MIT economist Jonathan Gruber suggested that a significant number of people who enrolled in Medicaid after the ACA already had been eligible under pre-ACA rules—an effect that CBO did not entirely anticipate. Joan Alker, a research professor at Georgetown University, credited the "welcome mat effect" for enticing previously eligible people to enroll in Medicaid. "There was a lot of outreach and publicity, and people started coming in," she explained.

CBO's projections also were made before the Supreme Court's 2012 decision in National Federation of Independent Business v. Sebelius, which made the ACA's Medicaid expansion optional. According to an analysis by the Kaiser Family Foundation, several million more adults would have been eligible for Medicaid coverage if every state had expanded the program. Notably, this suggests CBO underestimated the consequences for Medicaid enrollment of the ACA as written by an even larger amount than current coverage data suggest.

How seriously should lawmakers and the public take CBO's estimates?

Most experts agree that CBO scores are an extremely important part of the legislative process. But they are also not perfectly accurate. Republicans are correct to point this out—but that leaves lawmakers facing a tough question: If they don't trust CBO, how can they anticipate the effects of their own proposals?

Nearly every long-term economic forecast involves significant uncertainty. But policymakers also need some sort of analysis to help them make decisions.  And while CBO's ACA projections were off in some areas, a 2015 analysis by the Commonwealth Fund suggests they were more accurate than several other forecasts by independent experts.

Robert Reischauer, who directed the CBO from 1989 to 1995, put it well when he recently told NBC News that CBO was both imperfect and essential. "Would I bet my dog's life on (the CBO score)? No," he said. "But do I think it's a very solid estimate? Yes, if I had to make policy."

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