Is the CBO Skeptical That ObamaCare Will Restrain the Growth of Health Care Spending?

When the Congressional Budget Office releases its Long Term Budget Outlook, which projects the nation’s fiscal situation decades into the future, it presents two possible scenarios. The first is referred to as the extended-baseline scenario. This scenario envisions an alternate fiscal reality in which current law doesn’t change and the government implements that law exactly as written.

The second is called the alternative fiscal scenario, and it looks a lot more like the universe we actually live in. In this scenario, the Bush tax cuts do not expire, and payments to medical providers do not drop 21 percent as called for by current law. These two deviations from the current-law baseline have been part of the CBO’s alternative fiscal scenario in the past. What’s new this year, however, is an assumption that many of the cost-control policies included in the new health care law fail to restrain the growth of health care spending after 2020. From the report:

In particular, several policies that would restrain the growth of spending for Medicare are assumed in the alternative scenario not to be in effect after 2020, yielding a higher level of spending in the 2020s and beyond. The upshot of those differences is that Medicare spending in 2035 is projected to be about 17 percent higher under the alternative fiscal scenario than under the extended baseline scenario—a difference that persists in later years because the growth rates of spending beyond that point are the same under the two scenarios. That gap highlights the important implications of those health care policies for the federal budget. [emphasis added]

The CBO, as a matter of policy, does not endorse either scenario as more or less likely. But the widespread understanding in Washington policymaking circles, on the Hill and elsewhere, is that the alternative fiscal scenario is what the CBO believes to be the most probable outcome. The clear implication here, then, is that the CBO does not expect many of the provisions in the Affordable Care Act’s intended to restrain long-term spending growth to work.

The CBO has hinted at this view before, delivering numerous warnings that the health care law’s price tag would, hint-hint, be a lot different if the law were not implemented exactly as intended. But this is the closest thing yet to a clear sign that Director Doug Elmendorf is skeptical about the law’s long-term prospects for restraining spending.

Not surprisingly, liberals are not pleased. Kevin Drum, for example, accuses the agency—which does not offer policy recommendations and has maintained a scrupulous stance of non-partisanship since its founding—of “playing politics” and of acting like “a Washington Post op-ed columnist.” Like Drum, I wish that the report had made a greater effort to spell out why it chose to include these assumptions about PPACA in its alternative scenario. But I think his accusation is too strong. There are certainly political implications in the CBO’s choice of long-term fiscal assumptions. Yet it does not necessarily follow that these choices were made for political or partisan reasons, or that the organization has stepped beyond its bounds. The point of the alternative fiscal scenario is for the CBO to game out what it believes to be the most likely actual fiscal path for the country, to call it like it sees it—or, perhaps, to project it like it assumes it. It’s simply unavoidable that from time to time those assumptions are going to cut against one side of the political debate. But the CBO’s business is to make those assumptions—regardless of who might be bothered by the results.

And no matter what, even if you agree with Drum that these assumptions politicize the office to some degree, I think it’s telling that the same CBO that liberals relied on so heavily to make the case for health reform’s fiscal responsibility is now implicitly expressing skepticism of its prospects for reigning in spending growth.

Read my feature on the CBO here.

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  • #||

    The totel effect is even wrse than the alternative debt scenario. look at the chart on pg 35. The alternative scenario sited assumes no capital crowding out due to government debt. With the assumption of capital crowding out, its even worse.

  • #||

    pg 21 on the doc 35 on the pdf reader

  • http://www.case-diy.com||

    Feeble effort. Go back three spaces.

  • Flyover Country||

    The CBO is racist.

  • ||

    Reality has a well-known teabagger bias.

  • Jeffersonian||

    Yes, but you forget who will be ruling over Hell and not serving in Heaven.

  • jasno||

    Point noted, but don't you think technology and innovation are going to be the dominant factors in future health care costs? I can't imagine health care even remotely resembling what we have now in 2025.

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