CBO Says Obamacare Exchanges Not In a Death Spiral

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Over at Vox, health care superguru Sarah Kliff writes about a new CBO report that projects no imminent “death spiral” for Obamacare. CBO reckons that 10 million people will buy insurance from the Obamacare exchanges this year, rising to 13 million by 2027. That’s definitely not a collapse, no matter how often Mitch McConnell and Paul Ryan say so. But Kliff adds this:

To be clear: The insurance marketplaces are way smaller than CBO had initially expected. Back when the law passed, the agency estimated that there would be 26 million people in the marketplace in 2017. We’re on pace to have a market less than half that size. A market with more people would likely have lower premiums, as it would mean more healthy people had decided to join.

This is true, but it’s important to understand why it’s true. CBO originally projected that Obamacare would lead to a big drop in the number of people on private health plans, who would then buy insurance on the exchanges. That didn’t happen. Instead, the number of people on private plans stayed nearly stable. Here’s how things turned out:

  • 2013 projection for 2016: +22 million on exchanges, -10 million in private coverage, +12 million in Medicaid = net +24 million (Table 1)
  • 2016 projection for 2016: +12 million on exchanges, -4 million in private coverage, +13 million in Medicaid = net +21 million (Table 4)

So the difference between the original projection and the actual numbers for 2016 is about 3 million. That’s a fairly small difference, and it’s basically good news: we’d rather have people on employer health plans than Obamacare. The coverage is generally better and it costs taxpayers less. The downside is that the low Obamacare numbers make the exchanges a bit less stable, but they aren’t showing any signs of collapse, and it’s a worthwhile price to pay anyway.

But really, you don’t even need to go through this exercise. The easiest way to see how Obamacare is doing is to look at the number of uninsured. Here are the projections:

There are 4 million fewer uninsured than CBO originally projected, and it’s cost the taxpayers less than CBO originally thought. In other words, Obamacare has performed better than projected and cost less than projected. That’s a big win.

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