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Orszag vs. the CBO: Round Two

Peter Orszag and the Office of Management and Budget have fired another shot at the Congressional Budget Office this morning, releasing a letter signed by an assemblage of health-care wonks all of whom believe that Orszag's Independent Medicare Advisory Council could save some serious money. But that's not all! Nine of the signatories to the letter are members of the CBO's panel of health-care policy advisers. That's not quite half -- the panel has 21 people -- but it's enough to show that there's some serious support for Orszag's proposal (or, more precisely, a beefed-up version of Orszag's proposal) even among the people the CBO considers experts.

All that said, it's a bit hard to say what this means in the broader context of health-care reform. For all the sound and the fury over the CBO's estimates, none of them have actually been very surprising, or even particularly bad. The administration might want to focus on whether health-care reform has the potential to save money in the long term, but the big question is whether people are willing to fund the coverage expansion in the short term. Speculative savings over the next few decades will never seem more concrete than guaranteed costs over the next 10 years.

By Ezra Klein  |  August 4, 2009; 1:30 PM ET
Categories:  Health Reform  
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Ezra, can you direct us to a good point-by-point comparison of the Obama/Orszag IMAC proposal and the MedPAC Reform Act, Sen. Rockefeller's S. 1110?

I am told they are similar, and certainly the goal is the same -- a Medicare policy- and price-setting entity that exists as far out of reach of the lobbyists as possible.

But I would like to compare the details.

Posted by: Rick00 | August 4, 2009 1:53 PM | Report abuse

Ezra, there are a few points that left leaning people are not considering.

1. There is NO WAY Congress is going to give up the power to appropriate Medicare funds (old people vote).

2. It is virtually impossible to actually cut Medicare spending (i.e. Republicans back in the mid 90s tried and were hammered).

3. If the government can't cut costs in Medicare how are they going to cut cost in a larger, more complicated system.

How about showing some cost savings in Medicare first and then sell an expansion of the plan?

Posted by: kingstu01 | August 4, 2009 1:54 PM | Report abuse

"The administration might want to focus on whether health-care reform has the potential to save money in the long term, but the big question is whether people are willing to fund the coverage expansion in the short term. Speculative savings over the next few decades will never seem more concrete than guaranteed costs over the next 10 years."

Are you suggesting that the administration should abandon the "bending the curve argument"? Isn't it critical, when you contemplate a program that will cost a lot of money in a context in which people are worried about rising deficits, that you can persuade people that your plan really will help with deficits, or at least not make them worse? If you're right that costs now will always seem more concrete than speculative savings in the long-haul, isn't a big expansion of coverage a nearly impossible sell right now?

Posted by: marksjo1 | August 4, 2009 2:25 PM | Report abuse

Saying that something COULD save money is far different than saying that it will save money. As long as you let politicians have the final say on the recommendations then I don't think that our political system is capable of holding down the costs of healthcare longterm. Obama wants credit for spending cuts without actually proposing any spending cuts and I don't particularly get why people think the CBO is biased for saying that he isn't proposing any spending cuts.

Posted by: spotatl | August 4, 2009 2:42 PM | Report abuse

One of the most effective health care funding mechanisms is to make employer provided plans taxable above a given threshold. This change could also have cost control benefits as it would make more people aware of the costs of health care. Obama is failing to lead by not supporting this measure as a result of political consideratiosn related to unions.

Posted by: newjersey_lawyer | August 4, 2009 3:28 PM | Report abuse

I may be missing something, but I don't see this as another shot fired at the CBO. The letter opens up saying that they agree with the CBO that there could be long-term savings from an IMAC proposal.

On the bigger picture, I agree-- I don't see how this impacts the broader debate. The Obama administration keeps trying to argue for their whole reform package through then lens of improved cost-savings, whereas coverage expansion is mostly a separate issue. People ARE skeptical of short-term cost increases counter-balanced by hazier, long-term cost projections. Its a tough challenge. Hiatt did an excellent job on asking this exact question in his interview with Obama-- why not save coverage expansion for another day:

Obama: "I guess theoretically, you could just work on bending the cost curve without providing additional coverage. I actually think that you lose some of the benefits of getting universal coverage. For one thing, all the issues of uncompensated care would still be coming up. You potentially would lose the benefits of buy-in from insurance companies and drug companies and hospitals and others who feel that, okay, at least if we have an individual mandate and everybody has bought into the system, then we have more consumers, and we are more willing then to wring out insufficiencies in providing -- insufficiencies per patient, essentially.

So I actually think that not only is it the right thing to do to go ahead and cover people, but I think it becomes easier to build a consensus around making some of the changes that are necessary to bend the cost curve."

I think as Obama continues to learn, coverage expansion may help with special interests, but may not be hurting consensus with the general populace.

Posted by: wisewon | August 4, 2009 3:34 PM | Report abuse

That last line should read "may be hurting consensus with the general populace."

Posted by: wisewon | August 4, 2009 3:35 PM | Report abuse

But is it precisely those out years that are the big part of the problem. Long term health care programs are similar to compounding interest.

It is in the long term where the real issues are and it is foolish not to think of the long term fiscal impact of sneeking a health care reform plan in just under there 10 year deficit neutrality window.

Posted by: lancediverson | August 4, 2009 4:06 PM | Report abuse

So I was missing something-- Orszag's blog post makes it pretty obvious that he's looking to undermine the credibility of the CBO. On the substance, it still seems dishonest.

He criticized CBO for speculating on the long term potential benefits of IMAC, and then gets a number of its advisors to do the same, trying to imply CBO was selling IMAC short. As I wrote above, on the actual policy merits, the economists are mostly agreeing with CBO, even though Orszag is trying to suggest otherwise.

Posted by: wisewon | August 4, 2009 8:19 PM | Report abuse

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