CBO’s ObamaCare analyses carry big uncertainties

posted at 10:12 am on March 19, 2010 by Ed Morrissey

Yesterday, the CBO released its initial analysis of the House reconciliation bill that amends the Senate version of ObamaCare.  While many people stressed that this was a “preliminary” estimate — the “final” version is due in a couple of days — the CBO’s analyses rarely differ substantially from the preliminary to the final stage.  The Washington Post comes closer to the real problem with any CBO analysis, which is that the bill attempts so many changes that a comprehensive analysis becomes almost impossible to make.  Analysts start having to make a compounding series of assumptions that could well prove false, which would result in unpredicted outcomes.

The Post posits two scenarios in which the outcomes would differ greatly than the predictions:

The bill contains numerous provisions meant to reduce the long-run growth in the cost of health care, such as by funding “comparative effectiveness research” to figure out what treatment strategies offer the most bang for the buck. Insurance companies would push their customers to pursue those treatments and thus keep costs down.

But the CBO was cautious, predicting zero savings from that program and others meant to develop ways to make the health system more cost-effective over time.

Some health experts have argued that the agency was too conservative in its approach and that those programs could lead to vast savings in the cost of health care and make the legislation a boon for the federal budget.

But budget experts are more wary, concerned that the programs could just as easily produce few savings, or even cause higher costs.

Given that “comparative effectiveness” primarily provides a means for rationing, the chances of it hiking costs are on the low side.  The real danger with comparative effectiveness is that it will be used to deny treatments in a government-run system, or as our President once put it, patients will be told to just take painkillers instead of receiving effective treatments.  It could potentially act in the same manner as defensive medicine does now, demanding a series of tests for conditions that aren’t indicated in patient presentations, but that’s not terribly likely since the government would then have to fund it.

The second scenario is much, much more likely to come to fruition:

But perhaps the biggest risk that could cause the budget impact to diverge from the CBO estimates comes from Congress. The estimates assume that the legislation plays out as written over the coming decade, which would mean reining in the growth of payments to doctors and hospitals and implementing a tax on high-cost health insurance plans.

Those two policies are responsible for bringing in the revenue and cost savings that allow the plan to expand coverage to 32 million more Americans yet, according to the projections, bring down the deficit.

But that falls apart if a future Congress finds the cuts or taxes too painful to handle and overturns them.

That will fall apart faster than the Post suggests.  This Congress is already debating a “doctor fix” that rescinds the reimbursement cuts to providers, even though the numbers they submitted to the CBO rely on those lower figures.  The Post also fails to identify the larger risk with the so-called “Cadillac plan” tax, which is that insurance companies will simply stop offering those kinds of plans in the future.  They will tailor their plans to avoid the tax, and as a result, the expected revenues from that tax will eventually dissipate — and probably much faster than anyone thinks.

The CBO should have developed alternate cases for these potential outcomes, but in their defense, they’ve been asked to score a fantasy from the very beginning.   The Post reminds us that there are plenty of reasons to take the CBO analysis with a Lot’s Wife-sized grain of salt, not the least of which is the fact that it depends on Congress to follow through on their pledges.

This is the reason that incremental change makes a lot more sense.  It eliminates the need to compound assumptions, and it’s more reversible when it fails.

Keith Hennessey has more thoughts along these same lines.

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s/b ? instead of . My bad.

Dire Straits on March 19, 2010 at 11:36 AM

I don’t expect term limits to ever be imposed. There are too many politicians who make their fortunes off the taxpayer’s back to ever expect them to restrict themselves. As you say, the public will have to do it, and we can probably expect the sort of swings we have seen in recent years from one party to the other.

Cody1991 on March 19, 2010 at 11:28 AM

We could get term limits in committees via a Rules change the moment Rs came back into power. You might be surprised how much of an effect that might have.

DrSteve on March 19, 2010 at 11:36 AM

** Page 65/section 164: The plan will be subsidized (by the government) for all union members, union retirees and for community organizations (such as the Association of Community Organizations for Reform Now – ACORN).

Then there is this little gem…

Keemo on March 19, 2010 at 11:38 AM

Keemo on March 19, 2010 at 11:36 AM

Link, please?

iurockhead on March 19, 2010 at 11:41 AM

The gems just keep coming…

** Page 241 and 253: Doctors will all be paid the same regardless of specialty, and the government will set all doctors’ fees. (does anybody want their child in med school)

** Page 272. section 1145: Cancer hospital will ration care according to the patient’s age. (death panel)

Keemo on March 19, 2010 at 11:41 AM

iurockhead on March 19, 2010 at 11:41 AM


Keemo on March 19, 2010 at 11:42 AM

REAL costs?

Lets see…

IRS and Health Dept. will increase in size, to enforce this, not in the bill…. est 50-100 billion a year.

Medicaid incresed costs to the States, not in the bill.

Employer and Insurance companies having to do MUCH more paperwork for employees… not in the bill.

Medicare money counted twice…

Phantom savings from Medicare fraud… (if the Government could enforce the rules, don’t you think they already would have done so?)

Total costs will be at LEAST 3 Trillion… and that money HAS to come from somewhere in an already teetering economy.

Romeo13 on March 19, 2010 at 11:49 AM

Total costs will be at LEAST 3 Trillion… and that money HAS to come from somewhere in an already teetering economy.

Romeo13 on March 19, 2010 at 11:49 AM

They will tax the people as much as they possibly can, then default via inflation, after which the Welfare State all comes crashing down.

Let not your hearts be troubled! This is the beginning of the end of our glorious Fascialist system!

It’s like Denninger said: Taxes now, “benefits” NEVER.

We cannot borrow 10% of our GDP and spend it forward, as the CBO projects we will try, in a futile and permanent attempt to replace consumer demand.

If we do not stop this idiocy we will soon be unable to fund Social Security, Medicare and Welfare in all its forms, leading to an immediate and critical breakdown of our society.

The mad reach for revenue, Madame Speaker, is why you’re in such a hurry – and you know damn well I’m right.

If you succeed, we will get your tax bill now and the promised health care never.

That’s a fact.

Rae on March 19, 2010 at 12:12 PM

The Post also fails to identify the larger risk with the so-called “Cadillac plan” tax, which is that insurance companies will simply stop offering those kinds of plans in the future.

So who, exactly, defines what a “Cadillac” plan is?

I’d bet in a few years, we’ll all have them.

John Deaux on March 19, 2010 at 12:38 PM