HolyCoast: CBO Cost Estimates for Obamacare Could be $1 Trillion Too LOW
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Saturday, August 08, 2009

CBO Cost Estimates for Obamacare Could be $1 Trillion Too LOW

Now that's a scary thought. The Obamacare advocates were already angry at the CBO's estimate of the program's cost. This isn't going to make them any happier (from Hot Air):
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.
The additional scary thing is that nobody in Washington really knows what Obamacare will do to the budget or our economy. They simply provide us with scenarios full of rainbows and unicorns and expect us to buy it without question.

Those days are over.

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