The analyses and cost estimates provided by the Congressional Budget Office have had an enormous effect on the public debate about health care reform over the last two years. But, as Douglas Holtz-Eakin and I point out in an op-ed today in Politico, CBO, a professional and respected institution, in this instance based its analyses on unrealistic assumptions, which can harm the policy debate and the public understanding of the new health care law:
The core promise of the new law is that low- and moderate-income households getting insurance through new state-run “exchanges” will have their premiums capped as a percentage of income…. The population potentially eligible for this new federal entitlement is large. The Census Bureau says there are about 111 million Americans under the age of 65 in households with incomes between 135 percent and 400 percent of the poverty line.
But the Congressional Budget Office forecasts that only 19 million people will be getting the new federal premium subsidies in 2019. That’s because the law stipulates than any person offered qualified insurance coverage by an employer is ineligible for premium assistance offered by the exchanges, and the CBO expects most employers to continue sponsoring insurance plans. This would sharply limit the migration to the heavily subsidized exchanges.
But is that a reasonable assumption?… [A more realistic estimate] is that an additional 35 million workers and their families with incomes below 250 percent of the poverty line — who would clearly be better off in the exchanges as opposed to on job-based coverage — could end up there over time, one way or another.
And when they do, costs will soar. The CBO projects that the premium-assistance program will cost about $450 billion from 2014 to 2019, but that cost would rise to $1.4 trillion if workers and their family members with incomes between 133 percent and 250 percent of the poverty line were to migrate out of their current job-based plans and into the exchanges on Day One. That’s nearly $1 trillion more than the amount advertised by the law’s supporters.
You can read the entire piece here.