The Golden Rule of Comparison and the ACA

The golden rule of comparison, we tell our students, is simple:

Compare like-to-like where this is possible; account for differences where it is not.

Honestly, if you just apply this one rule religiously to anything billed as a comparison, you’ll outperform most people in evaluating comparisons.

Case in point, the Congressional Budget just published an update of its analysis of the Affordable Care Act. In the document they state:

CBO and JCT now estimate that the insurance coverage provisions of the ACA will have a net cost of just under $1.1 trillion over the 2012–2021 period—about $50 billion less than the agencies’ March 2011 estimate for that 10-year period [Emphasis mine].

That’s a good comparison. They are comparing the 2012-2021 estimate they made previously to the new estimate for 2012-2021. It’s the same agency, and we assume it’s the same analytical framework, but with updated data. It’s like to like as you tend to get in life.

Yet this was the response from Tom Price, of the House Republican Policy Committee:

House Republican Policy Committee Chairman Tom Price, M.D. (R-GA) issued the following statement regarding the Congressional Budget Office’s (CBO) updated cost estimate of the president’s health care law. The new CBO projection estimates that the law will cost $1.76 trillion over 10 years – well above the $940 billion Democrats originally claimed.

Why this discrepancy? There’s multiple reasons. But I find this one, which Ezra Klein points out,  is the most interesting:

One other thing that’s confused some people is that this estimate is looking at a different timeframe than the original estimates. The CBO’s first pass at the bill looked at 2010-2019. But years have passed, and so now they’re looking at 2012-2021. That means they have two fewer years of implementation, when the bill costs almost nothing, and two more years of operation, when it costs substantially more.

The idea is that since the ACA doesn’t *really* kick in until 2014, a 2010-2019 estimate is a 6-year cost, and a 2012-2021 estimate is an 8-year cost. There are other issues as well, perhaps even more important, but it occurs to me that this is a pretty common parlor trick people play with numbers a lot.

As far as how to solve the question of whether the 2010 estimate was high or low, Ezra correctly suggests the easiest way to do it is to ignore totals and look at the revisions. The net effect of the revisions identified by the CBO is negative — the bill costs less than initially thought.

Compare like-to-like where this is possible; account for differences where it is not.

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