Healthcare projections are hard

If you’re into this sort of thing, you probably heard about a new study by Chuck Blahous that says the ACA, or Obamacare, is much more expensive than anyone thought. In essence, Chuck Blahous argues that the accounting methods used by the bill and the CBO evaluations double dip, applying spending as savings and creating an illusion of debt reduction when the reality will be a larger debt. Unsurprisingly, proponents of the bill say that this report is dishonest, making up new rules just to make Obamacare look bad.

After reading a few articles on the matter I found the issue kind of tricky. Blahous’s argument sounds plausible, and defense of the standard methods of accounting are complex and not intuitive. Fortunately, Ezra Klein points out a fairly simple test. Take Obamacare out of the equation, and instead look at the country’s long term fiscal prospects according to the rules Blahous uses in this paper.

Blahous baseline

Note that the lines represent the government deficit under current law without Obamacare. The blue, which is the baseline used  by the Congressional Budget Office for their analysis of Obamacare, shows the deficit essentially stabilizing and holding steady. When people talk about the dire state of our country, they are generally taking into account other factors that would push the line higher. The red line represents the rules Blahous uses, and show the deficit disappearing entirely without Obamacare by 2050.

So according to this report, we have no problem with growing deficits. To get there Blahous applies the letter of the law as it currently stands, assuming tax cuts will happen as scheduled and in the case of budget shortfalls government services will cease. Does Blahous truly believe the deficit is going to disappear on its own and that Obamacare is our only serious long term fiscal problem?

Unfortunately, despite the fondest hopes of its supporters, the passage of the ACA unambiguously darkens a dim fiscal picture.

Clearly not. Yet when presented with this criticism, Blahous insists that his analysis is correct because it is supported by a strict reading of the law.

I think this is an excellent example of why our political and economic systems are performing so poorly right now. Issues like this are at the heart of making good decisions, but they’re also much too complex for most people to have the time and patience to sort through. If someone like Blahous presents a logical sounding argument that plays to people’s prejudices and has a lot of detail backing it up, many voters will be convinced. The fact that it is ultimately incorrect doesn’t matter unless people are willing to look beyond the narrative and their expectations and try to understand the details.

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