On Monday the Congressional Budget Office released its cost estimate of the Republican Senate Better Care Reconciliation Act. CBO calculated that the proposed bill would reduce the deficit by $321 billion over the next decade. That is welcome news.
Less welcome, however, was CBO's conclusion that the Senate bill would result in an additional 15 million uninsured in 2018 due to a lack of penalties. By 2026, CBO reports 22 million more Americans would be uninsured, primarily due to lower Medicaid coverage.
No matter that the number of Americans on the Obamacare exchanges is shrinking due to higher prices and fewer companies offering coverage.
Dave Hoppe, former chief of staff to House Speaker Paul Ryan, asked me in an email, "If there are few insurance companies offering insurance through the exchanges in 10 years, how are people without insurance losing anything?"
The CBO estimate of 15 million Americans losing insurance [in 2018] defies both logic and economics.
In 2013 CBO predicted that 24 million people would be on the exchanges in 2017, but only 9.5 million are now enrolled.
And no matter that the Senate bill does contain a penalty for lack of insurance coverage. Those who drop their insurance for more than two months must wait for another six months before being able to sign up. This is to stop people gaming the system by signing up only when they are sick.
It is a greater penalty than today, when under some circumstances—loss of a job, changed life circumstances — people can sign up without penalty. In order to avoid the mandatory six-month gap in coverage, many people will choose to keep coverage.
But let us play along with CBO and assume no penalty. Even so, the agency's numbers are just not credible.
If 15 million people were to immediately drop coverage next year due to lack of penalties, then they are only buying insurance today to avoid the penalty. The insurance itself has little value to them. CBO's conclusion reflects the mindset of state planners.
In reality, people buy insurance for a basic reason — they want the coverage. They buy types of insurance that they are not forced to buy, such as life insurance, renter's insurance, and home and auto insurance above state mandated levels. They want peace of mind and protection against unpredictable expenses.
State waivers in the Senate bill will make it even easier for people to purchase coverage. States will be able to approve policies that are closer to what people want to buy, such as catastrophic health policies.
These types of policies are less expensive, and protect people against major expenditures but leave them to pay for routine costs out of pocket.
Remember those complaints when plans closed down? People will be able to get them back.
This will reduce the cost of insurance. Under basic economics, less expensive insurance should have greater consumer demand. CBO concludes the opposite, at least for 15 million Americans in just one year.
Those people who would still lose coverage under Obamacare will not go without coverage completely. The bill provides funds for states to cover low-income residents and tax credits to make it easier for people to purchase their own insurance. The CBO estimate of 15 million Americans losing insurance defies both logic and economics.
People should not be forced, as they are now, to buy plans with coverage for mental health problems, drug abuse, and infertility treatments. It's no secret that the Obama administration broadened health insurance coverage to get political support from different medical and social constituencies.
We have seen how that drives up the bill and drives insurers out of the market.
Just because the government does not provide something does not mean that people will not receive it. The government does not provide clothing, but everyone seems to wear something.
Those who recall the outrage over the cancelled plans after passage of the Affordable Care Act, and the fury over the increased premiums over the past two years, will realize that insurance companies are not being permitted to offer plans that people want to buy.
Giving them that ability again will increase coverage.
The CBO report states that "the amount of federal revenues collected and the amount of spending on Medicaid would almost surely both be lower than under current law..."
However, people could be covered at lower cost with state-directed programs. Seema Verma, architect of Indiana's successful Healthy Indiana Plan for low-income residents, now heads the Centers for Medicare and Medicaid Services.
Americans know that Washington's Obamacare is not working. Those who have struggled with the website to buy insurance on an Obamacare exchange know it is not working. Those who live in counties where few if any providers compete know it is not working. Those who pay higher premiums for less coverage with high deductibles know it is not working.
Something else in Washington is not working right: CBO.
This piece originally appeared in Investor's Business Daily