IMAC and the CBO
I think there’s no denying that the Obama administration is in some ways disappointed with what the CBO had to say yesterday about their proposal to create a beefed-up MedPAC called IMAC. As Peter Orszag explained at the end of his blog post on it, they wound up taking on a speculative long-term issue and attaching a very precise cost estimate to it without any clear reasoning:
A final note is worth underscoring. As a former CBO director, I can attest that CBO is sometimes accused of a bias toward exaggerating costs and underestimating savings. Unfortunately, parts of today’s analysis from CBO could feed that perception. For example, and without specifying precisely how the various modifications would work, CBO somehow concluded that the council could “eventually achieve annual savings equal to several percent of Medicare spending…[which] would amount to tens of billions of dollars per year after 2019.” Such savings are welcome (and rare!), but it is also the case that (for good reason) CBO has restricted itself to qualitative, not quantitative, analyses of long-term effects from legislative proposals. In providing a quantitative estimate of long-term effects without any analytical basis for doing so, CBO seems to have overstepped.
That said, it’s worth being clear that we’re dealing with two separate issues here. Barack Obama has laid out two different cost constraints on health care reform. One is that reform must be CBO-certified as deficit neutral within the 10-year scoring window. That means what however much new coverage costs will be balanced out, within the 10-year window, by either offsetting spending reductions or else new revenue. The other is that the bill must “bend the cost curve” over the long run, meaning it must slow the rate of growth in long-run health care expenditures.
These are totally different things. And the point of IMAC is to meet the second goal, not the first. And the CBO score speaks to the first goal, not the second. Both goals are important, but to learn that a particular proposal aimed at issue two doesn’t solve issue one doesn’t actually tell us much of anything.
6 Responses to “IMAC and the CBO”
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July 26th, 2009 at 1:13 pm
Once again, Matt’s 20/20 comes through. Yglesias: ” Please notice, also, that your sleeves are on fire.”
July 26th, 2009 at 1:22 pm
Ok, so the IMAC isn’t going to save substantial funds, we’re not getting rid of the employer tax credit, the surtax is being substantially watered down so it only affects millionaires…how exactly is the health bill going to be deficit neutral OR bend the cost curve long term? don’t tell me all the cost savings sufficient to pay for the bill are coming from IT.
July 26th, 2009 at 1:51 pm
Doctors, like most professional groups in this country, don’t seem to have very high aspirations for service to mankind.
If they so desired, they could have instituted best practices data systems long ago.
The dirty little secret is that private insurance provides doctors with higher demand while also insulating them from market forces wrt cost. There is an economic reason why the AMA has historically opposed “socialized medicine”.
But doctors are popular, so politicians don’t dare speak truth to them.
July 26th, 2009 at 4:44 pm
Doctors, like most professional groups in this country, don’t seem to have very high aspirations for service to mankind.
Except for that stupid Hippocratic Oath, but who really follows that anyway.
July 26th, 2009 at 5:53 pm
Thank you.
Health Care reform is so complicated and so many people are confused.
You make a very important point very clearly when you write:
“Barack Obama has laid out two different cost constraints on health care reform. One is that reform must be CBO-certified as deficit neutral within the 10-year scoring window. That means what however much new coverage costs will be balanced out, within the 10-year window, by either offsetting spending reductions or else new revenue. The other is that the bill must “bend the cost curve” over the long run, meaning it must slow the rate of growth in long-run health care expenditures.
“These are totally different things. And the point of IMAC is to meet the second goal, not the first. And the CBO score speaks to the first goal, not the second. Both goals are important, but to learn that a particular proposal aimed at issue two doesn’t solve issue one doesn’t actually tell us much of anything.”
Yes, exactly. Plan to quote you on HealthBeat.
July 26th, 2009 at 6:31 pm
Matt is right here – structure and process to control Medicare costs and longer term ‘bending of the curve’ is a completely different matter than finding money to add uninsured on the roll.
But I am not sure if Matt is getting what is happening here. Essentially, the only player with impeccable credentials – CBO – is loosing the shirt here and joining the group of players who are already naked – Congress and Administration.
CBO was required to make this distinction very clear so that opponents of health care reforms (mainly Republicans) do not further criticize and derail reforms; as well as an opening is not offered to Rangel and Schumers of this world who have been wanting to flaunt CBO fiscal discipline for long time. Now CBO seems like have given such an opportunity and we all are in a hole.
Bottom line – Congress, CBO and Administration; all 3 are making a royal mess of the situation with so many avoidable miscommunications and wrong volleys. This does not look good, nothing but ugly.
(More on http://www.21stcenturypolitics.com/2009/07/cbo.html)