Obamacare

The CBO and Health Care

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With health care reform so dependent on Congressional Budget Office scores, there's a lot of coverage of the office and how it works today. Let's start with the Washington Post, which has a smart piece on the high levels of uncertainty involved in health care scoring:

If all the pieces move exactly as planned, everything will work just fine. Maybe!

The latest estimate of what health-care reform would mean for the government's finances was such a hot document Thursday that at times the Congressional Budget Office's Web site couldn't handle the traffic.

But as much as the 25-page "score" of the legislation was treated as holy writ in Washington—Democrats eagerly flagged its conclusion that the package they aim to pass this weekend would cut the deficit by $138 billion over the coming decade—the reality is considerably messier.

Budget experts generally have high praise for the work of CBO analysts, the non-ideological technocrats who crunch the numbers to estimate the fiscal impact of legislation. But their work is often more art than science, and although the forecasts that accompany legislation are always filled with uncertainty, this one contains more than most.

One major reason is the sheer complexity of the legislation. If Congress were considering, say, a 20-cent increase in the gasoline tax, the CBO could easily analyze how that would affect gas consumption and do some simple math to calculate how much money it would raise. The same goes for figuring out the cost of legislation that offers a new benefit, such as an expansion of food stamps.

This strikes me as just the right way to look at it: The majority of the time, the CBO does a very good job within the constraints they have. But there's a lot of uncertainty in their projections—uncertainty which the CBO is the usually first to acknowledge—and in general, the press and interested partisans don't recognize. (How many times have House Speaker Nancy Pelosi and President Obama claimed simply that health reform "will cut the deficit," as if it's a guaranteed outcome?)

There's also significant political risk involved in the CBO's projections. A legislative plan might work if enacted to the letter, but the CBO can't really factor in the possibility that a future Congress might just decide to do something else entirely (though it can acknowledge this possibility in its reports). From the Post piece:

"The risk is that you've put in these things to create higher savings over time, but then when you get there, people say, 'We can't do that,' " said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "The huge risk is that the constituencies that didn't win their lobbying effort to stop the bill will be there every single day between now and when these things hit, trying to reduce their impact."

But for Democrats, creating those savings—real or not—was something of a necessity; health reform was sold in large part on the dubious notion that it is "fiscally responsible." And achieving that label meant hitting certain predetermined targets—a process that, as the New York Times explains, Democrats spent quite a bit of time perfecting:

How did the numbers come out just right? Not by accident.

Congressional Democrats have spent more than a year working with the nonpartisan budget office on the health care legislation, and as they fine-tuned many of the bill's various provisions in recent weeks, they consulted repeatedly with its number-crunchers and the bipartisan staff of the Joint Committee on Taxation.

In other words, the overall numbers were never going to miss the mark. Whenever the budget office judged that some element or elements of the bill would cause a problem meeting the cost and deficit-reduction targets, Democrats just adjusted the underlying legislation to make sure it would hit their goal.

And then, as Slate's Chris Beam explains, there are the various legislative budget gimmicks, which we've noted repeatedly here at Hit & Run. I'm not sure I'd say the scoring system is broken, exactly, but it's certainly been expertly gamed. 

I looked at the CBO's history and influence on the health care debate here and examined its hedges and uncertainties here.

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  1. So basically, every bill Congress sends to the CBO can have budget projections based on raising the same taxes to the same level (or making the same benefit cuts), and that revenue/savings will be applied to every single one of those bills instead of merely once, w/o any reason to expect the additional revenue or savings.

  2. “The most ethical mendacious administration in history.”

    I may have to hold my nose and stand with the Republicans at tomorrow’s rally at the Capitol, for all the good it will do. But, I gots to vents. I’ll take the daughter and turn it into a civics lesson.

  3. There’s also significant political risk involved in the CBO’s projections.

    Essential reading:

    http://www.doczero.org/2010/03/the-terms-of-the-deal/

    When Barack Obama tries to convince you to accept a government takeover of the health-care industry, he is making a promise he won’t be around to keep. ObamaCare’s job-killing taxes are front-loaded, but in order to fool the Congressional Budget Office into giving it a respectable deficit score, its benefits are delayed for years. Even if Obama wins re-election, he would complete his second term long before the program was completely phased in? and no external authority exists to compel either Obama, or his successors, to honor the promises he’s been making.
    . . .

    Think about the evolution of ObamaCare health insurance into single-payer socialized medicine, something Obama and the Democrats quietly promise to left-wing audiences. The government will have every incentive to press for this transformation, and arrange it by pushing private competitors out of the market, then presenting single-payer government health care as tomorrow’s “solution” to the problem they’re working to create today. There is nothing to stop them from doing this.

    The only guarantee you have that ObamaCare will provide the promised benefits, and remain within its boundaries, is the trust you place in the word of Barack Obama and his party? and your faith in future politicians who have yet to be elected.

    Really, an excellent blog all around.

    1. This is incorrect, though:

      “ObamaCare’s job-killing taxes are front-loaded, but in order to fool the Congressional Budget Office into giving it a respectable deficit score, its benefits are delayed for years. ”

      As I noted here (https://reason.com/blog/2010/03/11/budget-gimmicks), the back-loading of the spending is designed to reduce the total cost, not gin up bigger deficit reductions.

      1. Not so fast, Peter. The CBO score is for the first ten years. The front-loading of taxes and back-loading of spending both reduces its 10-year cost and gives it bigger 10-year deficit reductions.

      2. Over any given t year period, delaying the spending improves the deficit calculations. As t goes to infinity, the size of this effect decreases.

        Both complaints are valid.

  4. This morning, on CNBC, they were credulously parroting the “Well, this is gonna cost a lot, but it’s STILL BETTER than doing nothing” line.

    BULL SHIT!

    BULL SHIT!

    BUL SHIT!

  5. It’s also too bad that the CBO doesn’t offer its estimates on increases in nonfederal spending due to the included mandates.

    The politicians parade the deficit reduction numbers, briefly note the huge federal budgetary cost numbers, and completely ignore the huger costs that aren’t in the budget.

    On another topic, how many people who hear “reduces future deficits” know that this means “increases taxes”?

    1. They did in 1993, but the new majority found way to game the system so that the CBO wouldn’t price the private sector mandates.

      I suspect you knew that, since you brought it up.

      1. Actually, I had read the article in your primary cite, but I hadn’t followed the link to the explanation of why private costs aren’t included. I just thought it was a long-standing custom, not yet another artifact to be gamed.

  6. It is not health reform, it is entitlement expansion.
    Being a cynic, I have no doubt it will have.
    But, that could be a good thing, if people understand that the only way to get value is to decide for themselves.

  7. I see that the tax on medical devices is still in the bill. I await the explanation as to how making medical devices more expensive will make health care more affordable. I suppose it works the same way that a giant new entitlement lowers the deficit.

    1. Also how we’re going to encourage tourism by taxing tourists.

  8. Mousetrap. How funny! My daughter and I are playing that almost nightly right now. She likes the whole Rube Goldberg concept. We don’t actually play the game, we just run the mechanism over and over again.

  9. Anybody seen this leaked Dem memo that Hot Air is reporting? Includes instructions on how to mislead the public about the CBO score.

    1. That story is now on Drudge, in red. So no one can claim they weren’t told.

  10. Okay, I’m a little confused about the last part of your post, here. I can understand not liking the health care plan at all. But what about fixing legislation to be within cost boundaries is ‘gaming the system’ and not what you’d want them to be doing anyway?

    If there’s something screwy going on where adjusting legislation so it’s “meeting the cost and deficit-reduction targets” actually means something completely different, you might to find some way of explaining that.

    1. The point, Ardith, is that they make artificial tweaks to game the CBO process. Tweaks that on one expects to be permanent.

      1. I still don’t understand. What makes a tweak artificial, and what makes it a real adjustment to the bill to stay within cost? According to the NYT article, it looks like they’re taking out/modifying provisions that make the bill not fit the amount they want to spend. That, in and of itself, doesn’t scream ‘artificial tweaks’ to me.

        1. Dropping provisions altogether would presumably be acting in good faith, trying to balance the goals of passing a bill they like with a price target.

          Dropping provisions from this bill so they can be passed in a second bill doesn’t do jack shit for the budget, and frankly they don’t care. They’re just trying to manipulate their way into getting what they want. Unlike buying a bunch of unnecessary shit to reward yourself for finding a good sale or cheating on a diet, this stands a good chance of causing hardship and shortening lifespans in the long run.

  11. Might want to, that is.

    *fails at proofreading*

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