Congressional Budget Office’s Awful Obamacare Estimates Yield More Bad News

  • A Mercatus Center study shows significant Obamacare forecasting failures:
  1. Overall enrollment has fallen far short of forecasts
  2. Higher-income individuals are not signing up and their funds are needed
  3. Individual mandate penalties are not encouraging people to sign up
  4. Enrollees are sicker and poorer than forecasted
  • The result: companies are losing more money than forecasted, risk pools are under-funded with higher-than-expected costs, deductibles and premiums are higher than expected, even fewer people will sign up in the future as a result

The words “death spiral” comes readily to mind. It has already started.

Via Forbes

In a new study published today by the Mercatus Center at George Mason University, I assess key predictions made by both government and nonprofit research organizations about the Affordable Care Act’s (ACA) impact.

The misestimates include: overestimating total exchange enrollment, overestimating enrollment of higher income people who do not qualify for subsidies to reduce premiums, projecting too many healthy enrollees relative to less healthy enrollees, and underestimating premium increases.

This post focuses on the Congressional Budget Office’s (CBO) estimates. As CBO accounts for the first two years of the ACA’s implementation, its 2016 revised baseline will almost certainly show a lower overall budgetary cost for the law’s subsidies even as the average subsidy amount increases to account for a more adverse risk pool than expected.

Blase Projections 1200x424

CBO’s next estimate will likely show a lower budgetary cost principally because ACA plans are much less desirable than was expected and secondarily because the individual mandate is not as effective at inducing enrollment as was expected. Both of these developments should concern the law’s proponents since a lack of young and healthy people buying ACA plans sets the stage for an adverse selection spiral of higher average premiums and diminished enrollment of everyone but people with expensive health conditions.

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