Oops...CBO missed the cost of Obama Care by 1 trillion

[chip]

http://city-journal.com/2009/eon0805sp.html
The CBO is actually being kind to the would-be reformers. Its analysis likely understates—by at least $1 trillion—the true costs of expanding health coverage as current Democratic legislation contemplates. Over the last few months, my colleagues and I at the consulting firm Health Systems Innovations have provided cost estimates of health-care reform to both Republican and Democratic members of Congress, and we’ve posted these estimates on our website as well. We believe that the Democratic bills currently under consideration in the House and Senate would cost $2.1 trillion and $2.4 trillion, respectively—much higher than CBO’s figures. …

Why the difference in these estimates? We believe that we have better data on this issue than the CBO, which uses simulation models of health-insurance plans based on much older health-plan data—typically from 2001 or even 2000. Our estimates are grounded in 2006 commercial-insurance data to which the CBO doesn’t have access (the data are not publicly available and the CBO didn’t make provisions to purchase them). These data reflect the advent of much cheaper, high-deductible health plans and limited-provider network plans. If the government modeled its public option on these inexpensive plans, the result would be cheap enough to lure far more people away from private health insurance than the CBO estimates.

Our model has a good track record. The last time government introduced a major health-insurance innovation was 2004, which saw the introduction of Health Savings Accounts. We used the same model to predict that 3 million people would adopt these HSAs by the beginning of 2006. Our estimate, which we published in the peer-reviewed journal Health Affairs, was spot-on, predicting the market response more accurately than most other models, which produced adoption-rate estimates at least one-third lower.





Most informative line in the article


"(the data are not publicly available and the CBO didn’t make provisions to purchase them)"




Seriously?

[hailreagan]

Chip....you know they will attack the group saying this. Do they have any type of party affiliation that you know of or are they neutral since they present to both sides?

[Kegler300]

The CBO is, or was the gold standard for reviewing and scoring congressional budgets. I'd really like to know more because if the CBO has missed it by this much, we're in real trouble.

[Mike88]

The CBO is, or was the gold standard for reviewing and scoring congressional budgets. I'd really like to know more because if the CBO has missed it by this much, we're in real trouble.

I think the CBO intentionally downplayed it as much as they could get away with, and still it showed how bad Obama's healthcare plan really is on cost alone. If the CBO had been 100 percent honest I am sure some dead fish would be mailed to them.

[spinach]

Actually this is true for almost every estimate that the CBO gives on anything.
the CBO is not that accurate, and typically you can add about 30% to 50% to any estimate they make on anything.

As for the data, it would make a lot more sense for the CBO to spend the money it takes to get the latest and best data. That way everyone is more informed, and there is a better appraisal of the cost of any congressional idiocy coming down the pike.

the CBO should be using the 2006 data-
and should pay the companies to get that data, and also upgrade their models to parallel the models that have been historically the most accurate.

even so, the CBO paints a dismal picture for Obamacare-
and regardless of that his obamacare plan is totally unconstitutional.

[spinach]

The CBO is, or was the gold standard for reviewing and scoring congressional budgets. I'd really like to know more because if the CBO has missed it by this much, we're in real trouble.

This brings up another point.
Businesses in the private sector have people that estimate their revenue, expenses, and earnings for each quarter, and for the year.
When they meet or beat earnings, they are confident in their model.
however, if you miss earnings, that is a very serious problem, because it reflects a bad model, and also indicates that money is not going to be available for at least one item that was planned. It requires a company to do a lot of fast changes to it's models.
In addition, you don't want to beat earnings by a lot, consistently-- because that has the opposite effect-

your model is bad, and then you have excess capital that is sitting around and doing nothing, rather than being invested. Overshooting earnings by a lot is sort of wasteful as well.

Now for the CBO, the same is true. They need to be spot on-- or else their model needs revision. In addition, when they are low on costs, that automatically threatens an expense [to be possibly cut] and also requires the congress to meet and spend time on something AGAIN that should have taken only one meeting and one bill.
Likewise, the CBO does not want to overshoot the costs by a lot, because then programs end up getting voted down, for being too expensive, when in fact, they are not.

the CBO should never run an error margin of more than 5%.
They should have the latest and best data, and the best models.
It saves money in the long run to pay now, and have "good tools".