The Congressional Budget Office vs. The White House
The CBO has brought out a new report estimating the impact of the administration's proposed Independent Medicare Advisory Council, which would give an independent body of experts authority over Medicare reforms, and charge them with cutting costs and discovering efficiencies. This is something of an important release. The administration has sold the IMAC as a "gamechanger" on cost control. The CBO doesn't agree. It think that body will save some money, but not much. And for the first time, we're seeing a serious rift open up between the administration and the Congressional Budget Office.
The CBO's analysis suggests that the short-term effects of IMAC will be modest. That's to be expected -- it doesn't go into effect until 2015. Over time, the effects could compound, and a strong IMAC proposal could save a lot of money -- "equal to several percent of Medicare spending." Or maybe not. The CBO, at various points in its analysis, says that it's hard to know.
It's easy to understand why: The potential savings from IMAC aren't something you can plug into a formula. After all, the point of IMAC is not that it would implement the best ideas we have in 2009, but that it will give a body of experts the ability to implement the best ideas they have in 2022, and 2034, and 2019, and every other year. CBO can't guess at what those ideas will be any more than I can. We don't have the data they'll be using, we don't know the technology they'll be able to employ, and it's impossible to estimate the political climate. May as well ask what the top-rated NBC show will be in 2029.
Which makes it a bit strange that the CBO attached any numbers to its long-term predictions at all. The agency is usually quite conservative in its estimates: When faced with an unknown, it generally admits that it doesn't know. In this case, it confronted the unknown and came back with a pretty specific set of predictions, albeit predictions qualified by a lot of caveats. Peter Orszag, the former director of the Congressional Budget Office and the current director of the Office of Management and Budget, seems pretty shocked:
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 paragraph reads a bit like a very angry Data trying to hurt Spock's feelings. But translated out of Budget Wonk-ese, it's about the gravest charge one CBO director can lob at another: It's an accusation that the CBO has released an estimate that's driven by the desires of Congress (in this case, the desire to have seemingly concrete numbers) rather than actual facts. And as someone who is on record defending CBO against those who want more favorable estimates for health-care reform, I think Orszag has this one right: It's just impossible to say what the experts will want to do with Medicare in 2027, and it's similarly hard to know what the president, and Congress will allow them to do.
That said, it's worth putting this in some context. In 1994, Alice Rivlin was in Peter Orszag's position: a former CBO director who had left to head the OMB. Robert Reischauer had taken control of the CBO, and he decided that premiums paid to private insurers under the Clinton health-care plan should be considered payments to the government, and thus would have to be accounted for on the budget. This made the price tag of ClintonCare obscenely high and infuriated the administration, Rivlin included.
I think Rivlin was right on that one, as I think Orszag is right on this one. But it serves as a reminder that clashes between past and current directors are not uncommon, and that disagreement was far larger and more consequential than this dispute.
Photo credit: AP Photo/Alex Brandon.
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