What Insurer Bailout? Ctd

The CBO predicted that Obamacare’s risk corridors will save money. Barro takes that estimate with a grain of salt:

CBO’s report does not say it considered the one piece of information that really would make them smarter than the insurers: up-to-date demographic information on the health status of the insurance enrollees. CBO can’t have this information because it’s not collected through the signup process; it will only be known as people start filing claims.

I don’t mean to insult the economists at CBO, who are smart people doing careful work. But the value of their projections is driven by the quality of information available to formulate those projections, and that quality is lower here than when, say, CBO estimates how much income tax the federal government will collect last year.

So it’s too early to say the risk corridor will save taxpayers money. We don’t know. Which, again, is why the program exists to begin with.

Suderman adds:

CBO’s score of the risk corridors relied heavily on Medicare Part D’s history because the federal government doesn’t have a whole lot of experience with risk corridors in the health insurance market. Given the budget office’s cautious nature, it’s an understandable choice. But it may not actually tell us all that much about the practical reality of the provision and its probable costs.