Tuesday, January 26, 2016

Shocking CBO Report: Obamacare Will Enroll 40% Fewer Than It Predicted Last Year

In summary
  • PPACA to cover 40% fewer than CBO projected 10 months ago
  • More employees pushed into Medicaid where health outcomes don't improve; not PPACA Exchanges
  • CBO: The ACA reduces people's incentive to work, thereby further diminishing the U.S. labor participation rate

Federal bureaucrats issued yet another Congressional Budget Office (CBO) report yesterday, and buried deep inside was the revelation that the best, least partisan experts available were off by nearly half in their evaluation of PPACA's ability to cover the uninsured.  That's right, Obamacare's efficacy in covering the uninsured is 40% weaker than government experts projected just 10 months ago.  That is a stunning decline.

Under this updated projection, ObamaCare will enroll about 13 million customers this year: a reduction of 40% from last year’s enrollment prediction of about 20 million. Unfortunately, the reduced number of enrollees does not translate into a decreased price tag for the PPACA behemoth. In fact, the opposite appears true.

PPACA Covers Fewer While Costing More Per Person

The CBO further projects that the number of people receiving taxpayer handouts to buy Obamacare plans will be higher than expected.  Roughly 11 million people are expected to receive subsidies this year, compared to about 8 million people last year.  In addition, the CBO projects that per-person spending on healthcare programs “will grow more rapidly than it has in recent years.”  Taxpayers are expected to pay $18 billion more for Obamacare premium handouts in in 2016, reaching a total of $56 billion, and doubling that within the next ten years.

Less in Partially Private Funded Obamacare Plans, More On Purely Socialized Plans

As you may recall from prior posts, Medicaid is so woefully inadequate as a mechanism for insurance that it has "no significant effect" on health outcomes versus being uninsured. Much of this is because, in many cases, Medicaid's reimbursement rates do not even cover a provider's cost of issuing treatment. This graph from Forbes helps to illustrate the point.

For this woeful "benefit" taxpayers pay about $6,000 per beneficiary per year.

In 2014 and 2015 Medicaid spending grew by $36 and $48 billion respectively.  That is a 30% increase in just two years under PPACA. As you may recall (from page 73 of the downloadable CBO report):
Beginning in January 2014, the Affordable Care Act (ACA) gave states the option of expanding eligibility for their Medicaid programs to people with income at or below 138 percent of the federal poverty guidelines. By the end of 2015, 30 states and the District of Columbia had expanded their programs. The federal government pays a greater share of the costs incurred by enrollees who were made eligible for Medicaid in those states than it does for traditional enrollees: The federal share for those newly eligible enrollees is 100 percent through 2016 and declines thereafter, falling to 90 percent in 2020. In 2015, the federal government’s overall share of Medicaid expenditures was about 63 percent. 
The CBO goes on to forecast Medicaid spending to increase by 9% from 2015 to 2016, but only expects one million additional monthly beneficiaries.  This means that the CBO must increase its 2025 projection for Medicaid enrollment under Obamacare expansions from 11.5 to 14.5 million and increases taxpayer outlays for Medicaid from $97 to $114 billion by 2025.

Less People Participating in the Labor Market Due to PPACA

The CBO report continues to prognosticate that Obamacare will result in reduced labor force participation, specifically because it increases the marginal tax rate on work and provides additional rewards (governmental premium support subsidies) to those who don't work or are under employed (generally less than 30 hours per week).

One of the most astonishing statements in the report appears on page 35 of the downloadable PDF, where it states:
The most sizable effects [on the supply of labor] stem from provisions of the Affordable Care Act (ACA). The ACA’s largest effect on the labor market—especially as overall employment conditions improve—will come from provisions of the act that raise effective marginal tax rates on earnings, thereby reducing how much some people choose to work.
I suspect you will not see that language quoted anyplace in the mainstream media. That same paragraph goes on to explain:
The health insurance subsidies that the act provides through the expansion of Medicaid and the exchanges are phased out for people with higher income, creating an implicit tax on some people’s additional earnings. The act also directly imposes higher taxes on some people’s labor income. Because both effects on labor supply will grow over the next few years, CBO projects, they will subtract from economic growth over that period.
Put simply, PPACA penalizes additional work and that penalization will continue to grow over time, thereby more heavily burdening the U.S. economy.  Just in case the CBO did not make that point clearly enough, it was reiterated again on page 52 of the downloadable PDF:
The ... projected fall in potential labor force participation stems from some people’s reduced incentive to work as a result of the ACA and the structure of the tax code (whereby rising income pushes some people into higher tax brackets). Both effects reduce workers’ incentive to supply labor.
Source: The CBO Budget and Economic Outlook: 2016 to 2026
Nothing will change until after our Presidential election.  That new President will need to act fast and work with congress to address this nightmare.  Healthcare costs are escalating far too rapidly while we still have far too many uninsured and underinsured. PPACA needs dramatic reconstruction or replacement to not only address the problems - but to stop making them worse.

After publishing this article this morning, I went on the Michael Berry Radio Show to discuss it and some other PPACA updates with Michael.  You can listen to that here: 
- Audio may take a moment to load -

You can also hear the audio on Michael's site here (skip to 15:20).   

The following morning, I was on Armstrong and Getty discussing this story.  That Audio is here:

Or here on one of the Armstrong and Getty Podcast pages.