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BOHANON & STYRING: Evaluation of health care plan was devoid of nuance

April 1, 2017

Economic AnalysisWhen the Congressional Budget Office, or CBO, “scored” the American Health Care Act, it concluded that 14 million fewer people would have health insurance within a year. Those opposed to the AHCA crowed with glee; those in favor of the bill questioned the validity of CBO’s scoring.

Who’s right?

When the CBO scores a bill, it has to follow certain rules. Fair enough. But by nature, this excludes plausible details in the administration of the law. This means, as with most government statistics, one ought to recognize the limitations of scoring. This isn’t a particularly partisan point. The Obama administration wasn’t wild about CBO scoring, either.

Here’s a simple illustration:

Suppose you are the CBO person in charge of estimating how many people under age 30 will buy health insurance under ACHA versus Obamacare. One tiny piece of the puzzle.

Being a good economist, you know price is a key variable. Lower price = more insurance purchased, and vice versa. You scour the text of the AHCA and note insurers are allowed a bigger spread between prices charged to older enrollees versus younger, which implies lower prices for the young. However, the AHCA scraps Obamacare’s direct premium subsidies and substitutes smaller refundable tax credits.

You note that the U.S. secretary of health and human services promises to reformulate the “minimum essential benefits” that have to be in every policy. Policies with fewer benefits will be cheaper and are the plans the young prefer. But wait. You can’t count that, because it’s not in the bill. It’s a promise of a future regulation. Like a judge who can rule only on the evidence before him, you can “score” only the bill immediately in front of you. You can’t score every possibility that might emerge in the bill’s actual administration. Again, fair enough.

You do your best with the information at hand and conclude a million or so young people currently buying Obamacare won’t buy it under the AHCA. You duly report. This becomes part of the headline number, “14 Million Lose Health Coverage.”

You retreat to your cubicle, knowing you’ve done your bureaucratic job well. Still, something nags at you. Most of the young still buying health insurance are better off than under Obamacare. Those who choose to drop coverage do so voluntarily. But reporting on such nuance is not in your job description.

The headlines imply they are worse off. Deep down, you know maybe that’s not true.•

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Bohanon is a professor of economics at Ball State University. Styring is an economist and independent researcher. Both also blog at INforefront.com. Send comments to ibjedit@ibj.com.

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