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Posted at 2:57 PM ET, 01/ 6/2011

Will health-care reform really save the government money?

By Ruth Marcus

I'm a big critic of the new House budget rules, which have the perverse effect of making it easier to increase the budget deficit. And I think repealing the health-care law would be a mistake. But it's unfair to accuse House Republicans of being willing to blow a huge hole in the deficit by repealing health care and of being hypocrites on fiscal responsibility by exempting the effects of health-care repeal from their budget rules.

The Congressional Budget Office projects that the health care law, if implemented as promised, would save $230 billion over the next decade. There are two important words in that sentence: projects and if.

Of all the cost estimates that the CBO produces, the most complex and least reliable involve health care. This is in no way a criticism of CBO. No matter how sophisticated the economic model, the multi-layered assumptions about the future cost of health spending make the $230 billion projection closer to an educated guess (albeit a guess made by very educated economists) than a take-it-to-the-bank certainty.

And even if the CBO forecasts were guaranteed to come true, there is the political calculus to consider. CBO made this point in its usual, restrained way Thursday, noting that "current law now includes a number of policies that might be difficult to sustain over a long period of time. If those policies or other key aspects of the original legislation would have been subsequently modified or implemented incompletely, then the budgetary effects of repealing [the health-care law]...could be quite different."

Translated into English: don't bet on that $230 billion. The health-care law will require billions in new spending. It relies on the expectation of billions in savings from slowing the growth of health-care costs and assorted cuts and taxes -- all guaranteed to produce howls of outrage, and a burst of lobbying, from the affected interests. Health-care reform, done right and with steadfastness that is not always forthcoming from the legislative branch, could be a huge contributor to reducing the deficit.

But the costs of the new law are far more certain than the savings. Anyone who's spent any time in Washington knows better than to assume that health-care reform will end up as a money saver.

Democrats will, I suspect, have ample opportunities to accuse Republicans of hypocrisy on fiscal responsibility. This isn't one of them. And there are stronger defenses of the new law than to claim that repeal would be a budget buster.

By Ruth Marcus  | January 6, 2011; 2:57 PM ET
Categories:  Marcus  | Tags:  Ruth Marcus  
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Comments

Ruth Marcus's tone here is very circumspect, but mine won't be.
Anyone who can believe the cost of the health-care law as advertised is engaging faith with her/his heart, and not the mind.
Health care costs continue to skyrocket since this legislation did nothing to help costs.
We don't get a money-back guarantee on misinformation from our leaders.

Posted by: slatt321 | January 6, 2011 3:30 PM | Report abuse

When the CBO costs anything, they are by law obligated to operate under the assumptions of the member or senator who asks the costing be made. Under these rules, I can prove anything costs money or saves money depending on the assumptions provided to the CBO. Therefore, no one should take anything coming out of the CBO seriously.

Posted by: jeffreed | January 6, 2011 4:21 PM | Report abuse

If the Republicans criticizing the CBO numbers had alternative numbers showing a different projection, I would be more inclined to give them the benefit of the doubt. As it stands, their reply amounts to "I don't believe the CBO." Surely the issue is significant enough to warrant a little investigation before casting a vote based on a hunch. Isn't it?

Posted by: bsimon1 | January 6, 2011 5:04 PM | Report abuse

bsimon1, I'll answer your post with a quote from Marcus's article here.

"Of all the cost estimates that the CBO produces, the most complex and least reliable involve health care. This is in no way a criticism of CBO. No matter how sophisticated the economic model, the multi-layered assumptions about the future cost of health spending make the $230 billion projection closer to an educated guess (albeit a guess made by very educated economists) than a take-it-to-the-bank certainty."

She also points out that "Democrats will, I suspect, have ample opportunities to accuse Republicans of hypocrisy on fiscal responsibility. This isn't one of them."

She's not a conservative or a Republican.

Posted by: slatt321 | January 6, 2011 5:36 PM | Report abuse

If things go as they have gone, Medicare is going to bankrupt the country, and the cost of health care has long been and is now an enormous competitive disadvantage for the US.

We pay more and we very largely get less.

If the Republicans, as a party, as opposed to any number of worthwhile Conservative think tanks, have any ideas how to correct this, now would be a good time to hear about it. Many many years too late, but...


Posted by: bawrytr | January 6, 2011 6:14 PM | Report abuse

Remember the words of the Former Speaker of the House, Nancy Pelosi: "We have to pass the bill so we can know what's in it". That says it all. REPEAL THE HEALTHCARE BILL NOW!

Posted by: barrysal | January 7, 2011 2:28 AM | Report abuse

There is nothing in Obamacare that reigns in cost. There are no incentives to physicians to order fewer tests. There is no robust bargaining ability with device manufacturers or pharmaceutical companies. There is no provision to provide for low cost high deductible policies that would encourage more individual self imposed rationing of care through health savings accounts. So anyone who trumpets "savings" are simply counting on increased revenue from the "mandatory" penalty which may well be unconstitutional. This bill will be a disaster financially and it is predictable now - we shouldn't open our mouths five years from now and say that in hindsight the cost estimates were overly optimistic. Health care reform needs to be accomplished but it should provide incentives for low cost high efficiency care. Malpractice reform to simulate "vaccine courts", cost efficiency analysis of tests and treatments with marginal benefit with variable co-pays for those tests that are not absolutely necessary, profiling physicians for their cost per patient to identify outliers whether fraudulent or just ineffective physicians (yes a physician who spends too much money per diagnosis is ineffective folks), bargaining power with big pharma and device manufacturers (why are we paying 5-10 times more for drugs and devices than our Canadian brethren?), and yes reasonable end of life decision making in concert with patient wishes and physician counsel when appropriate (families understand the concept of prolonging death and dying versus treatment if they are so afforded the opportunity with a careful discussion with a physician they trust) and the list goes on. There is a way to improve our health care and also provide for the entitlement of health care for all but those are the types of changes that would be required not the juvenile compromise that was pushed through congress.

Posted by: billthebeast | January 7, 2011 6:15 AM | Report abuse

There is nothing in Obamacare that reigns in cost. There are no incentives to physicians to order fewer tests. There is no robust bargaining ability with device manufacturers or pharmaceutical companies. There is no provision to provide for low cost high deductible policies that would encourage more individual self imposed rationing of care through health savings accounts. So anyone who trumpets "savings" are simply counting on increased revenue from the "mandatory" penalty which may well be unconstitutional. This bill will be a disaster financially and it is predictable now - we shouldn't open our mouths five years from now and say that in hindsight the cost estimates were overly optimistic. Health care reform needs to be accomplished but it should provide incentives for low cost high efficiency care. Malpractice reform to simulate "vaccine courts", cost efficiency analysis of tests and treatments with marginal benefit with variable co-pays for those tests that are not absolutely necessary, profiling physicians for their cost per patient to identify outliers whether fraudulent or just ineffective physicians (yes a physician who spends too much money per diagnosis is ineffective folks), bargaining power with big pharma and device manufacturers (why are we paying 5-10 times more for drugs and devices than our Canadian brethren?), and yes reasonable end of life decision making in concert with patient wishes and physician counsel when appropriate (families understand the concept of prolonging death and dying versus treatment if they are so afforded the opportunity with a careful discussion with a physician they trust) and the list goes on. There is a way to improve our health care and also provide for the entitlement of health care for all but those are the types of changes that would be required not the juvenile compromise that was pushed through congress.

Posted by: billthebeast | January 7, 2011 6:16 AM | Report abuse

Re Slatt 321: Health care costs, this year, rose by their lowest level in 50 years. Just a coincidence?

Posted by: mg11231 | January 7, 2011 6:32 AM | Report abuse

The GOP repeal will not save anybody money. Obama care will likely not save anybody money because of the new mandates. The mandates just opened the door for the medical insurance industry to increases rates.

Want to reduce rates and save all of us money?

Consumers and governments at all levels must walk away from the medical insurance industry.

Why?

1. high dollar CEO's & stock options

2. golden parachutes

3. reckless spending of insurance dollars on special interest campaign funding

4. shareholders

5. spending $1.4 million medical insurance dollars a day to keep fiscally responsible IMPROVED Medicare Insurance for All off the table.

6. sales commissions

7. The medical insurance industry does not provide health care.

Posted by: rheckler2002 | January 7, 2011 6:34 AM | Report abuse

The Truth About Drug Companies

The author calls the pharmaceutical industry a ?vast marketing machine? that thrives on monopoly rights and public-sponsored research but produces few innovative drugs.


— By Peter Meredith

The high price of prescription drugs has put -- and kept -- U.S. pharmaceutical companies in the news recently, but Dr. Marcia Angell argues that problems with the industry run even deeper. In her new book, The Truth About Drug Companies: How They Deceive Us and What to Do About It (reviewed in the current issue of Mother Jones), the former editor of the New England Journal of Medicine contends that the industry has become a marketing machine that produces few innovative drugs and is dependent on monopoly rights and public-sponsored research.


Angell disputes the industry’s reputation as an “engine of innovation,” arguing that the top U.S. drug makers spend 2.5 times as much on marketing and administration as they do on research. At least a third of the drugs marketed by industry leaders were discovered by universities or small biotech companies, writes Angell, but they’re sold to the public at inflated prices. She cites Taxol, the cancer drug discovered by the National Institutes of Health, but sold by Bristol-Myers Squibb for $20,000 a year, reportedly 20 times the manufacturing cost. The company agreed to pay the NIH only 0.5 percent in royalties for the drug.

Con't

http://motherjones.com/politics/2004/09/truth-about-drug-companies

From DailyFinance: http://srph.it/fA3nUn

Posted by: rheckler2002 | January 7, 2011 7:21 AM | Report abuse

A damn good reason for consumers and government to walk away from the medical insurance industry:

Bring on the FBI and the Grand Jury!!!

Thursday, June 25, 2009

Health insurers have forced consumers to pay billions of dollars in medical bills that the insurers themselves should have paid, according to a report released yesterday by the staff of the Senate Commerce Committee.

The report was part of a multi-pronged assault on the credibility of private insurers by Commerce Committee Chairman John D. Rockefeller IV (D-W.Va.). It came at a time when Rockefeller, President Obama and others are seeking to offer a public alternative to private health plans as part of broad health-care reform legislation. Health insurers are doing everything they can to block the public option.

Insurers make paperwork confusing because "they realize that people will just simply give up and not pursue it" if they think they have been shortchanged, Potter said.

More on this story:
http://www.washingtonpost.com/wp-dyn/content/article/2009/06/24/AR2009062401636.html

Where is the FBI and the grand jury?

Posted by: rheckler2002 | January 7, 2011 7:28 AM | Report abuse

Thank you for being honest. Educated guess is being kind. Many key cost components were never placed before the CBO's calculators.
Further, I give you one piece of anecdotal evidence from yesterday (Thursday, Jan. 6th):

"Blue Shield of California seeks rate hikes of as much as 59% for individuals"

Said headline from the L.A. Times
It is smoke and mirrors to believe this albatross of a reform bill will EVER result in savings. Gullible are the politicians, and gullible are those who swallow this legislation.

Posted by: jay_thompson | January 7, 2011 8:55 AM | Report abuse

Ms Marcus's compliant about the CBO projections apply to ALL economic projection. For example, The middle projection of the Social Security Administration (the one everyone quotes) has been consistently wrong. We would do better by reading the entrails of a goat.

There are, however, facts that we already know--that involve no wild guess for assumptions. Here is one. Other industrialized countries get better health care than the US as measured by all 16 of the bottom line public health statistics, and they do it at HALF the cost per person on average. If our system were as efficient, we would spend $1.3 TRILLION less on health care each and every year.

They all have some form of universal government run health care. Why can't learn from them?

Posted by: lensch | January 7, 2011 9:59 AM | Report abuse

There are problems with each of the arguments here.

With the first point, the Republicans are not exempting health care spending from their weakened Paygo rules. They are just exempting themselves from them. It is likely that Democrats will favor some health care changes in the future that could raise deficits. Do you think the Republicans will exempt them from their rules because health care estimates are speculative?

If you are going to have rules like this, and the Republicans are for nothing if not gimmicky rules to cut deficits in the place of actually cutting deficits, you have to go with the best available estimates. And that is what the CBO provides. Killing health care reform could cost considerable more than the CBO estimates as well, but one needs a standard.

With the second, any changes to the current law would have been covered under Paygo, so that is something of a non-problem. The whole idea behind Paygo is that one limits increases to the deficit by matching them at the time they are legislated. It is hard to see what would gut the idea more than saying that one can raise deficits now on the grounds that one would be likely to raise them later anyway.

Posted by: beckerl | January 7, 2011 11:35 AM | Report abuse

There are problems with each of the arguments here.

With the first point, the Republicans are not exempting health care spending from their weakened Paygo rules. They are just exempting themselves from them. It is likely that Democrats will favor some health care changes in the future that could raise deficits. Do you think the Republicans will exempt them from their rules because health care estimates are speculative?

If you are going to have rules like this, and the Republicans are for nothing if not gimmicky rules to cut deficits in the place of actually cutting deficits, you have to go with the best available estimates. And that is what the CBO provides. Killing health care reform could cost considerable more than the CBO estimates as well, but one needs a standard.

With the second, any changes to the current law would have been covered under Paygo, so that is something of a non-problem. The whole idea behind Paygo is that one limits increases to the deficit by matching them at the time they are legislated. It is hard to see what would gut the idea more than saying that one can raise deficits now on the grounds that one would be likely to raise them later anyway.

Posted by: beckerl | January 7, 2011 11:46 AM | Report abuse

Honest liberalism at its best!

Thanks, Ms. Marcus, for countering the political hucksters.

Posted by: hambya | January 7, 2011 11:49 AM | Report abuse

Honest liberalism at its best!

Thanks, Ms. Marcus, for countering the political hucksters.

Posted by: hambya | January 7, 2011 11:50 AM | Report abuse

The law as passed will save money. If modified, the modifications must be evaluated. Same as with any other law. Alll the rest is BS.

Posted by: AMviennaVA | January 7, 2011 3:18 PM | Report abuse

All projections, of both costs and savings, are just that, projections. It is certainly legitimate to question the assumptions of any projection, but to be credible such questions must include a) the specific assumptions questioned; b) why the are likely to produce an erroneous projection; c) what assumptions might be more appropriate; and d) what the implications of those assumptions would be. Simply holding one's hands over one's ears and screaming "I don't believe you!" is not a credible, or very mature response.

Second, there is no reason to believe that the costs are any more "real" than the savings. Certainly some projects intended to produce savings may not be fully implemented. Then again, some programs that might generate costs may not be fully implemented either. To argue that powerful lobbies could distort the intended effects of the law is to argue against the role of powerful lobbies in our legislative process. It should not be used to undermine the validity of CBO projections.

Perhaps at this point we should consider the projections around the costs of the prescription drug benefit passed under Pres. Bush. The Administration said the cost would be $400 billion, as I recall. Others, including the CBO, said it would be higher, but their projections were denigrated by those powerful lobbies. We subsequently learned that the administration may have "intentionally" adopted assumptions that would underestimate the costs, and the costs ended up being over $700 billion (forgive me if the numbers aren't spot on, I'm relying on an increasingly faulty memory). All of that occurred, as I recall, under a Republican administration, with a Republican House and Senate. Now the same party again wants to pretend that numbers they don't like aren't real, and we are asked to give them the benefit of the doubt. Please.

I agree with Speaker Boehner, the CBO's numbers aren't always accurate and they are sometimes forced to operate under unrealistic assumptions (remember the Bush tax cuts that were supposed to expire after 10 years). However, to politicize the important need to gather information about the likely impact of legislation, as the Republican party is doing, and you seem to be condoning, is a crime. I would have expected better analysis from you.

A loyal fan, Mark

Posted by: MarkMcK1 | January 7, 2011 6:52 PM | Report abuse

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