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How the CBO would estimate your grocery list

So long as I'm recommending Lori Montgomery's profile of CBO's Phil Ellis, this is a pretty good explanation of how the CBO does its work:

Much of what the CBO does is akin to trying to forecast your grocery bill in 10 years. First, it establishes a baseline: Your history of spending $200 a week at Safeway projected into the future with adjustments for inflation and expected demographic trends (i.e., more children, larger pets). Then it factors in proposed policy changes: Say you want to eat only organic and enroll your husband in Jenny Craig. Costs for meat, produce and dairy would go up, but spending on toothpaste and Saran Wrap would be unaffected. Meanwhile, the extra $70 a week for diet food would be partially offset by lower spending on Cheetos and frozen pizza.

The CBO has plenty of data to help make such calculations, including projections for inflation and the price of organics. But it would have to make some judgment calls: Is it reasonable to assume that Krispy Kremes are off the table? Or is it safer to budget for a dozen doughnuts once a quarter? And even the most careful estimate can be blindsided: What if the baby you projected to arrive in 2012 turns out to be twins in 2010?

The other piece of this is that CBO can't call you a liar, even if it thinks you're lying. Imagine you're something of a food faddest. You've gone on Atkins and tried to eat local and attempted to rid the house of butter. But it never sticks: Within three or four months, you're always back to normal. Or maybe your husband never abides by the diet, even if you hew closely to its limits. The CBO might know that history, but they can't take it into account. It's not for them to tell you what you'll do.

That's pretty much what's been happening with Medicare doctor payments (also known as the "sustainable growth rate"): Congress has set a schedule for itself, and even though it keeps exempting itself from that schedule, CBO has to pretend that Congress will make incredibly draconian cuts in doctor's payments any day now. Everyone knows it's absurd, but it's a convenient fiction for Congress. Jon Cohn has more on that.

By Ezra Klein  |  October 19, 2009; 12:34 PM ET
Categories:  Budget  
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Comments

the SGR is just another in a litany of examples of how the government cannot control its costs when there is politics involved. That's why the Medicare commission makes so much sense but too many in congress are too power hungry to give up any of it no matter how unsustainable the path has become over the years.

Ya let's entrust a public option to Medicare rates. How long before that goes by the wayside???

Posted by: visionbrkr | October 19, 2009 12:53 PM | Report abuse

The cuts to physician payments are not "draconian". The original Draco wrote laws in blood and all crimes were punished by death. That's draconian.

What we are talking about here is a 21% reduction in payments. That would still be more than Medicaid pays! And Medicare accounts for just a fraction of most physician's income. In general I don't think Medicare payments should be politicized, but we're in the middle of health care reform for crying out loud. We should not be cutting the AMA a check before we pass meaningful reform.

Posted by: bmull | October 19, 2009 1:19 PM | Report abuse

So now that you agreeing that CBO has to pretend that Congress is going to make these cuts; do we say that CBO's $81B surplus figure for SFC bill is misleading? 81 - 251 = -$170B is the real cost of that bill if Congress goes ahead with Medicare reimbursement package outside SFC bill. Add to that the failure to realize further cuts as proposed in the SFC itself. So it can very easily go to $300B to $500B deficit over 10 years period.

That is the real argument of most folks who do not believe Congress.

What is there to prevent this happening? iMAC - will it stop that? Will Congress be forced to accept those recommendations? Or do we have triggers in SFC such that cuts start automatically when certain thresholds are not met?

And if in your learned opinion indeed there are no such built in 'mouse traps'; why is Obama Care believable or good for us? It will take us down further the path of Banana Republic.

Posted by: umesh409 | October 19, 2009 1:21 PM | Report abuse

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