THE FEDS $146 BILLION DOLLAR MISTAKE: Bad Things Happen When A Government Prediction Is Way Off

Let’s face it, Obamacare had been a nightmare since it began. We have the website failure and then the corruption with the state set ups where millions went unaccounted for. Yes, we have the Gruber episode that should have buried the whole damn Obamacare debacle. So now we have a HUGE miscalculation on the part of the Congressional Budget Office…this is big:

What does the future of Obamacare hold now that its total cost is expected to be 11% higher between 2016 and 2025 than initially expected?

There are mistakes, and then there are big mistakes. What the Congressional Budget Office’s latest report on federal subsidies revealed was a mistake of monstrous proportions on the part of the federal government.

Here’s what a forecasting error looks like
The Congressional Budget Office, or CBO, has been making projections on the future of Obamacare, and healthcare in general, for years. Initially, the CBO had projected that up to 21 million people would sign up for private health insurance using Obamacare’s transparent marketplace exchanges by 2016. However, that estimate has been substantially reduced to just 12 million. According to the Department of Health and Human Services, Obamacare enrollment totaled “about 12.7 million” as of the end of third enrollment period (Jan. 31, 2016). Ultimately, the CBO foresees private health enrollment via Obamacare topping out at between 18 million and 19 million people between 2018 and 2026.

Why such a huge difference in actual enrollment versus initial projections? To begin with, the government appears to have overestimated just how many people would sign up on private exchanges versus being enrolled via their employer. The data has thus far shown that nowhere near as many people as expected dropped out of employer-sponsored insurance to sign up on Obamacare’s marketplace exchanges, meaning there was a considerably smaller uninsured pool than initially anticipated.

The other possibility is that the shared responsibility payment (SRP) isn’t working as initially expected. The SRP is a penalty charged to consumers who fail to purchase health insurance and who don’t have a qualified exemption. The average SRP in the first year of Obamacare (2014) totaled $190, according to H&R Block, with the Kaiser Family Foundation predicting an average penalty of $661 for 2015 tax returns and $969 in 2016. Despite this increasing penalty, young adult enrollment is still well below initial expectations, most likely because the cost of the penalty is still much less than the annual cost of purchasing health insurance.

By itself, this 9 million-person enrollment shortfall on Obamacare’s exchanges is pretty substantial. Health-benefit providers had been licking their chops with the expectations of adding 20 million-plus enrollees within the first three years following implementation. However, that bubble has been popped, with only a few insurers truly benefiting.

But this mistake is far from the worst.

Now, here’s what a monstrous forecasting boo-boo looks like
As noted by the CBO report, the biggest boo-boo comes the federal governments’ estimate of how many people would enroll for Medicaid and Children’s Health Insurance Program (CHIP).

Initial estimates from back in 2010 pegged Medicaid and CHIP combined enrollment at about 52 million in 2016. The actual figures? How about 68 million current enrollees in 2016, or a difference of 16 million. The report notes that total Medicaid/CHIP enrollment grew by 3 million last year, and it’s expected to swell to 74 million by 2026.

How did the federal government miss so badly? The CBO believes that fewer people than expected enrolled in employer-sponsored plans because they were eligible for free healthcare under the expanded Medicaid program. Traditional Medicaid fully covers consumers making up to 100% of the federal poverty level. Obamacare’s expanded Medicaid program, which 31 states and Washington, D.C., took advantage of, covers people earning up to 138% of the federal poverty level. The federal government appears to not have understood the magnitude of the lure to drop out of employer-sponsored care and be covered by Medicaid.

What’s even more egregious is that this estimate in 2010 was done before a Supreme Court decision in 2012 that allowed states the right to choose whether or not they wanted to expand their Medicaid program.

When President Obama initially signed the Affordable Care Act into law in March 2010, Medicaid expansion was mandatory. However, a ruling of 7-to-2 by the Supreme Court allowed individual states to make the decision of whether or not to expand. Ultimately, 19 states have chosen not to. Their reasoning? The federal government offered financial assistance to all expanding states between 2014 and 2016 but fully plans to pare back its assistance to just 90% from 100% between 2017 and 2020. The holdout states simply felt that they would be left on the hook for too much additional revenue generation to cover these new Medicaid members. If Medicaid expansion was mandatory, the CBO estimates another 4 million people would be enrolled.

This 16 million-person shortfall is far from insignificant. In fact, the CBO estimates that the federal government’s failure to accurately forecast how many people would be enrolled in Medicaid/CHIP to be $146 billion over the next decade. When taking into account factors like the estimated $46 billion the federal government will save by paying out less than expected in subsidies for marketplace exchange enrollees, as well as the $28 billion less it’s expected to collect in revenue because the Cadillac Tax will be suspended for an additional two years, Obamacare is now expected to cost $136 billion more than originally forecast over the long-term.

Is Obamacare sustainable? It’s anyone’s guess at this point
What does the future of Obamacare hold now that its total cost is expected to be 11% higher between 2016 and 2025 than initially expected? That’s really anyone’s guess, as major changes could be on the horizon…like elect a Republican President who’ll scrap the entire thing!

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