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PPACA Projection Accuracy

By August 16, 2011Commentary

The National Bureau of Economics publishes a number of health-related economic analyses, sometimes very technical and even a little obtuse, but often very useful and interesting with a great deal of facts and guidance for policymakers.  And then there are papers like the one by Jonathan Gruber, that purport to analyze the accuracy of the Congressional Budget Office’s projections on the effects of the health reform law.  Mr. Gruber is hardly unbiased, he not only was a paid consultant to the administration in developing the law, but he also was a paid advisor for the Massachusetts reform and serves on the board of the health exchange in that state.  Nor surprisingly, he uses Massachusetts for his case study to show the likely effects of the federal law.   (NBER Paper)

The author notes that CBO projected that the law would increase the ranks of the insured by 32 million people, both through a Medicaid and private insurance expansion, and would result in one trillion dollars of additional spending, which is offset by certain other revenue increases and spending reductions.  He further notes that the Massachusetts reforms met the goal of decreasing uninsured people, without unduly raising costs and without straining the health delivery system in the state.  For some odd reason, however, he stops his analysis of the effects of the Massachusetts law with data from 2009.  Maybe that is because since that time the costs of the program have ballooned far beyond what was projected, leading to exploration of a vast experiment to try new provider payment methods or even price regulation.

Other difficulties in Massachusetts include free-riding by individuals who hop on and off insurance when they need it; increasing, not decreasing, use of emergency rooms and the unavailability of many physicians.  In addition to the likelihood of some of these problems developing at the federal level, as has been repeatedly pointed out by the CMS Office of the Actuary, the spending reductions needed to keep the reform law costs from soaring are never likely to be fully implemented, as they would probably bankrupt many providers.  Grand experiments like ACOs are also not likely to have the impact their proponents imagine.  This paper is basically a skewed advocacy piece which does nothing to advance our understanding of the real effects of the law.

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