http://danvillesanramon.com/blogs/p/print/2012/05/03/obromneycare-part-deux-estimation-boogaloo


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By Tom Cushing

ObromneyCare, Part Deux: Estimation Boogaloo

Uploaded: May 3, 2012

Okay, where were we? After a description of the major features of the Patient Protection and Affordable Care Act (ACA for short, or ObromneyCare if you prefer), you've been promised a treatment of its costs and the legal arguments regarding its constitutionality. Before we begin, I need a caveat.

There are at least three major problems with the former task. The first is predictable, in this era of partisan rancor: there is no end of information abroad in the land, but most of it is of the political axe-grinding variety. As such, it is designed to sell a position, not convey useful information to a hopeful electorate. Thus, it will focus on only the expenditure side, ignoring balancing revenue effects (e.g., penalties, excise taxes , and savings), or claim that costs have escalated mightily, when a later estimate simply includes more years of full implementation, or just unhelpful (Cf. the breathless "100+ new agencies" claim in a comment to a prior article). If your goal is to scare folks, it's easy to cough-up a scary-big number in the health-care field -- it comprises almost 20 percent of GDP.

The second problem is the inherent complexity of the prediction task -- predicting human behavior (Will the uninsured get coverage, or pay penalties? Will the many folks now eligible for Medicaid, but uncovered, get covered? Will the currently uninsured cost less to the system, because they won't wait for a crisis before they seek treatment?), and economic effects as many as ten years in the future (will the underlying economy be strong, meaning better employment and fewer uncovered individuals? How fast will medical costs escalate?). Depending on the assumptions you choose, you may determine your outcome -- and you know what your mama taught you about what else assumptions do.

Finally, estimation accuracy is compromised by byzantine mess of a payment system that currently exists. Not only is it impossible to accurately assess actual or comparative costs at an individual level (if you've had recent surgery, you know what I mean) – it's also nearly impossible to roll-up those separate unknowables into a comprehensible whole. Further, what do we do with all the costs of treatment for the uninsured, mandated since the 1980s, but unfunded? They are a substantial fraction in these calculations, and currently borne by...whom? Some costs are reimbursed by various level s of government, others by higher premiums for everyone, others go unpaid and enter the tax system by that route.

So, the task is daunting, and may be a fool's errand, but the latest Congressional Budget Office figures to be brutalized above are as follows, for the decade 2012-21:

Gross cost: $1,496 billion (Medicaid, children, and small business subsidies)

minus Offsets -$413 billion (excise taxes and penalty collections)

Net cost: $1,083 billion

Other federal budget effects (from earlier estimates, not updated recently):

Spending reductions: -$732 billion (Medicare changes)

Other revenue: -$520 billion (payroll and other taxes)

Net deficit effect: -$231 billion (that's right – CBO estimates ACA reduces the deficit).

So, there you have it, for what it may be worth. Individual effects will, of course, depend on your tax bracket, your age, current coverage, whether you are covered by hugely generous plan, and payroll tax exposure.

As to whether these numbers resolve the issue of whether anyone ought to support or oppose ObromneyCare -- I do not think that answer is here. That decision better relates to values issues: your view of the proper roles of government, individual responsibility, empathy, and whether you believe, as I do, that the current mess is unmanageable, corrupt, and needs a major overhaul.

You were promised some coverage of the legal issues -- mostly whether the federal government has the power to enforce an individual mandate. Frankly, that's been covered elsewhere, ad nauseum, so unless there's an upheaval in the Comments (meaning more than one-or-two curious souls), I intend to move on to other matters next week.

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