Wednesday, March 27, 2013

Breaking News: Insurance Costs Money, Scandal Ensues.

At first glance, this chart may induce panic:
You're shocked and appalled at how we were lied to about the costs of Obamacare, right? Well you shouldn't be, honestly. And I'm a little disappointed that the generally careful David Frum bought into this. Anyway, the data that Heritage used is in fact from the Congressional Budget Office, but what they've left out is the fact that the nine to ten year window used to "score" or estimate the costs of the Affordable Care Act has shifted into the future along with the newer estimates. 

So why is that important? Well, the Affordable Care Act goes into full effect in 2014, when everyone will be required, per the individual mandate, to purchase insurance. For an explanation of the mandate, see here. Anyway, some people will get subsidies or tax credits to purchase insurance, others will use Medicaid, etc. Naturally all of this costs money.  Now, when the first cost estimate came out, it covered the period between 2010 and 2019 and was around $898 billion dollars. You'll note that between 2010 and 2014 when the mandate goes into effect, there are four years in that estimate where there's no Medicaid expansion or tax credits or subsidies. 

In the latest February 2013 estimate, the 2013-2023 costs were put at around $1.6 trillion. Now the reason this shouldn't be surprising or scandalous to anyone is that the estimate window now includes three additional years of insurance coverage (not to mention an additional year in the scoring window). So of course the costs are going to be higher--insurance costs money!

If you look at the yearly cost estimates of the program where there's some overlap in the CBO reports, say, 2014 to 2019, and compare the 2010 and 2013 cost estimates for each year, you'll find something interesting, so here's a chart I threw together (the units on the Y-axis are in billions of dollars):



Those estimates look pretty consistent to me, within a margin of error. So where's the scandal here? Where's the cover-up of the true costs by the Obama Administration or the CBO? Because I don't see one.