A note on the CBO scores and bending the cost curve
Posted on July 16th, 2009 by Jason Rosenbaum in Congress Watch
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Igor Volsky at the Wonk Room has a must read post on Congressional Budget Office chief David Elmendorf's assertion the health reform will not save money, or "bend the cost curve" that's worth reading in full. But I'll excerpt:
But the budget outline that passed the Senate Budget Committee requires a fully funded health reform bill, and both the Senate Finance Committee and the House Ways and Means Committee are proposing different options to pay for reform and ensure that the bill does not add to the deficit. For his part, Elmendorf, is isolating the ledger of the federal government from the context of the entire system. In other words, since many of the savings from reform won’t be reflected in the federal budget, Elmendorf does not consider them. But modernizing the health care system (implementing electronic medical records, health information technology) and reforming the way Medicare and Medicaid reimburse providers will save money for the system as a whole. As Melinda Beeuwkes Buntin and David Cutler pointed out in a recent analysis, these savings can total to some $2 trillion. In fact, even the industry is on record as saying we can reduce the growth rate in annual health spending by 1.5 percentage points a year over the next 10 years, lowering spending overall health care spending by $2 trillion (this represents a 20 percent reduction in projected growth.) Elmendorf is looking at the trunk of the elephant and not the whole.
Still, what’s most peculiar about the Elmendorf statement is the suggestion that lifting the tax exclusion for employer-sponsored health benefits is one of the few ways to bend the cost curve. Technically, such an approach would save the government a good deal of money, but would it bend the curve? As Elise Gould points out in a brief for the Economic Policy Institute, there is no evidence that the exclusion — or this idea that health care costs are increasing because Americans are “cavalier” about the price of health care — “is a primary driver of price increases in health care. In fact, the tax exclusion has been around for decades, even during periods of low health care inflation.”
In testimony before the House Ways and Means Committee, Elmendorf walked back his comments, saying that in some ways federal spending will increase and in some ways it will decrease. When pressured by the Republicans on the committee, Elmendorf did not directly confirm his accusations.
The CBO is often the only number cited on costs, but as Igor shows, its focus can be extremely myopic. And Elmendorf's solution is very odd indeed, as the tax exclusion on health care has nothing to do with health care costs. And, Elmendorf walked back his testimony later in the day.
So take Elmendorf's words with a grain of salt.
The proposed HR3200 bill does nothing (zero, nada) to change provider costs as a whole. The average American will have just as many $ taken out of his pocket after it passes as before, he will just have guaranteed coverage rather than the current recision-and-lifetime-limited coverage. All this bill does is shift money around so that some currently being funded via uncompensated care funds charged to insurers or Medicaid get funded directly via Medicaid and/or subsidies instead. Thus the CBO *ought* to be scoring this bill as zero ($) cost — all it does is shift money around in the system a bit, it does not change the overall out-of-pocket costs for an average American.
To look at the cost of the bill as "$1 trillion" is ridiculous because not one cent more gets spent on healthcare by America because of this bill. But the CBO appears incapable of dealing with actual costs rather than on-budget costs. Sigh…
[Note: I am purposefully ignoring cost savings from the public plan competition forcing down insurance costs, health records, etc. here, just to simplify the equation for people. The point becomes even clearer once you add those in.]
I'm not sure where you're getting that conviction. The public option pays lower rates than private insurance does, and it moves away from fee for service. And like you said, the public option will compete to drive down costs. Plus, there will be billions in subsidies to change people's out of pocket costs.
So zero? Really? Prove it?
CBO Scores Reform
So when it comes down to the bottom line the hold up is the CBO score of 1.6 Trillion dollars. We expected the party of NO to say NO! But all the Democrats, the Blue Dogs are the worst, are putting price tags on the publics' lives!
Last night, I watched The Ed Show on MSNBC. Ed Schultz gave some CBO financial scoring information that I had never heard, and I do pay attention! Before the Bush/Chaney/Rumsfeld Admin and almost all of Congress agreed to start a war in Iraq for no reason, the CBO forcasted the potential cost for that war if it lasted 10 years. The price tag: $2.6 Trillion dollars!! That is almost double the CBO score for Health care Reform! Where were all the "small government, spend no money" Republicans back then? AND WHERE WERE ALL THE DEMOCRATS?! I don't remember any single one of them shouting about leaving that money for future generations to pay off.
Ed told us that taxing the 1-2% richest Americans making over $1 million dollars a year (they'd never miss it) would bring in $550 Billion dollars in 10 years. Letting the Bush "Tax Relief" (Like taxes were some kind of disease tormenting the rich!) lapse when it runs out soon, would raise another $775 Billion. Together, that's more than enough to pay for Health Care Reform without any other taxing!
YES, future generations will have to pay off all those trillions of dollars. But with Health Care Reform they will have access to affordable, quality, preventive and sick care so they will be healthier, stronger, more energetic, live longer and potentially pay it off sooner!
Of course, if the CBO scored SINGLE PAYER (Rep. Conyers' HR676 AND Sen. Sanders' S703)
I think there would be very few Health Care Reform dollars to pay for even in the present, so the future generations can conscentrate on spending their stronger, energetic, longer, healthier lives paying off the Iraq war!