Obamacare

Washington Catfight: CBO vs. OMB on Health-Care Reform

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In response to the Congressional Budget Office's report that current health-care reform proposals were unlikely to solve the country's long-term budgetary problems, the Obama White House put forth a plan to reduce spending it hoped would prove to be a "game changer." The idea, not exactly a new one in health-policy circles, was to set up an independent commission—IMAC, the Independent Medicare Advisory Commission—made up of doctors and policy experts who would recommend changes in how Medicare would be administered and paid for. Over time, the theory went, this empowered, independent commission would yield significant savings that Congress, hamstrung by interest-group politics, has historically proven incapable of achieving.

Office of Management and Budget director Peter Orszag, who helped craft the IMAC plan for the White House, reported on his blog this weekend that the CBO has looked into the details and found that it "could lead to significant long-term savings in federal spending on health care." Finally, some good news for the administration, right?

Not so fast. Orszag's post gives the CBO report a positive spin that it doesn't seem to warrant. What the CBO actually said was far more nuanced than the basically happy summary Orszag gives. First of all, the savings in the 10-year window that the CBO typically scores would be negligible—only about $2 billion on a $1 trillion bill. And after that, while there would probably be some reduction in the rate of rise for health-care costs, it's quite possible that the savings would remain trivial. And to increase the chance that significant savings would be achieved, the IMAC plan would need to be modified substantially from its current form.

Does this sound like the "game-changer" the White House promised? See for yourself. The whole CBO letter is worth reading, but here are two of the key paragraphs. 

In particular, CBO reviewed draft legislation transmitted to the Congress by the Administration on July 17, 2009, titled the Independent Medicare Advisory Council Act of 2009. CBO estimates that enacting the proposal, as drafted, would yield savings of $2 billion over the 2010-2019 period (with all of the savings realized in fiscal years 2016 through 2019) if the proposal was added to H.R. 3200, the America's Affordable Health Choices Act of 2009, as introduced in the House of Representatives. This estimate represents the expected value of the 10-year savings from the proposal: In CBO's judgment, the probability is high that no savings would be realized, for reasons discussed below, but there is also a chance that substantial savings might be realized. Looking beyond the 10-year budget window, CBO expects that this proposal would generate larger but still modest savings on the same probabilistic basis.

 

…Expected savings from the IMAC proposal would grow after 2019, but many of the above points would still apply, reducing the likelihood of attaining large annual savings. The considerable uncertainty about the amount of savings that might occur within the first 10-year projection period would compound in future decades. Although it is possible that savings would grow significantly after 2019, CBO concludes that the probability of this outcome is low for the proposal as drafted, particularly because there is no fall-back mechanism to ensure some minimum level of spending cuts beyond those already included in H.R. 3200.

 

This is not good news for reform advocates, particularly those who, like Orszag, have been pushing the idea that reform will bring rising costs under control. And clearly, Orszag isn't happy, which is why he finished his post with a surprisingly blatant snub: "In providing a quantitative estimate of long-term effects without any analytical basis for doing so, CBO seems to have overstepped." Sounds tame, but this is about as close to a catfight as you'll ever see between number-crunching Washington bureaucrats.

But what, I wonder, did Orszag expect? Scoring legislation over a ten-year period is already dicey. Projecting multiple decades into the future is almost impossible, especially for an agency as cautious and grounded as the CBO. And Orszag, as the CBO's last head, should know this. Meanwhile, he's essentially admitted that no one really knows what will be necessary to tamp down on rising costs. Neither politically motivated positive spin nor inter-bureuacratic sniping will change that. 

Last week, I wrote about the problem of cost-cutting in health care, and Jacob Sullum argued that health-care reform isn't worth the cost.  Watch Reason's Shikha Dalmia talk Medicare on Fox News below:     

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  1. Amid all the obfuscation, red herrings, name-calling, partisan politicking and phony number-crunching, nobody–not even the so-called “libertarian” sites like Reason–seems to be mentioning the one class of people who would be most affected by socialized medicine: the doctors themselves. Why is that, do you think? How will we be able to put our trust in the people whose livelihoods we have stolen?

  2. Let me get this straight. People are being bankrupted every day by healthcare costs either because they don’t have insurance or their evil insurance companies won’t pay for needed care. At the same time, millions of people are not getting the care they need because they can’t afford insurance. We are going to solve these two problems by providing a government run health insurance option that will be affordable and take all comers. And doing so is going to “cut costs”? It is almost like these people think costs don’t count if they are paid for by an insurance company.

  3. Those costs DON’T count!! Why do you think it’s called INSURANCE!! Duh.

  4. John, the types of people who run for office are not the types of people who are at all clear on what, exactly, money is. Seriously, the Venn diagram of that is just two circles that aren’t even touching.

  5. :-,

    Many of us have mentioned the unfairness to doctors if they are suddenly socialized and the storage of doctors that will result.

    Either read everything or stuff a sock in it.

  6. Many of us have mentioned the unfairness to doctors if they are suddenly socialized and the storage of doctors that will result.

    Sounds like things are going to be even worse than I thought.

  7. A horrifying vision of the future.

  8. The problem with IMAC, according to the CBO analysis, is that first of all the legislation promises to put people on the board who wouldn’t have a high self-interest in savings, but more importantly that the President (and then, with less power, Congress) would have to sign off on the recommendations.

    If the President and Congress refuse to make any cuts now, why should the CBO believe that some future President and Congress will make cuts?

  9. It’s DOCTORS! It’s made from DOCTORS!

  10. I keep trying to figure out how anyone could possibly believe any of the nonsense Obama says about this stuff.

    I can’t even imagine that Obama himself believes what he’s saying…

    It defies logic & math and history, and when the CBO itself,which so far as I’ve seen has been pretty generous with their estimates, is telling the administration that their plan is not going to save any money, how Obama keeps pretending it will is shocking.

    He’s supposed to be the guy who “listens” to smart people and deliberates carefully… Not that I ever believed that, but c’mon.

  11. SugarFree | July 27, 2009, 2:51pm | #

    :-,

    Many of us have mentioned the unfairness to doctors

    Crackpot commentary doesn’t count. I was addressing the national policy-makers and pundits, as well as the editors of this site. Reason rarely gets to the heart of any issue. Indeed, look at the headline of this article: Washington Catfight: CBO vs. OMB. It’s little more than a “he said/she said.” Where’s the underlying philosophical debate? Why no analysis from a doctor’s perspective?

  12. The goal is to get a bill passed…ANY bill:

    1. Dems in congress just want a pretext to declare victory; something to campaign on in 2010.
    2. Ideologues realize the REAL purpose is massive expansion of govt power. What actually happens to health care costs/quality is secondary.
    3. Kumbaya liberals just want a reason to feel good about themselves; the warm afterglow of having given the poor another entitlement.

    How it gets paid for, and how much costs will rise? These are niggling little details for future generations to deal with.

  13. If the President and Congress refuse to make any cuts now, why should the CBO believe that some future President and Congress will make cuts?

    What is this “future” President you speak of? Don’t we have the Right One in office now? Why would we need any other?

  14. > I keep trying to figure out how anyone could possibly believe any of the nonsense Obama says about this stuff.

    Sean, I hate to be the one to break it to you:
    They *don’t* believe it.

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