Economist Slap-Fight

The CBO scored the Obama Administration's plan for a beefed-up MedPAC called IMAC, the Independent Medicare Advisory Council, and didn't fins much to like about it.

For the second time this month, congressional budget analysts have dealt a blow to the Democrat's health reform efforts, this time by saying a plan touted by the White House as crucial to paying for the bill would actually save almost no money over 10 years.

A key House chairman and moderate House Democrats on Tuesday agreed to a White House-backed proposal that would give an outside panel the power to make cuts to government-financed health care programs. White House budget director Peter Orszag declared the plan "probably the most important piece that can be added" to the House's health care reform legislation.

But on Saturday, the Congressional Budget Office said the proposal to give an independent panel the power to keep Medicare spending in check would only save about $2 billion over 10 years- a drop in the bucket compared to the bill's $1 trillion price tag.

"In CBO's judgment, the probability is high that no savings would be realized ... but there is also a chance that substantial savings might be realized. Looking beyond the 10-year budget window, CBO expects that this proposal would generate larger but still modest savings on the same probabilistic basis," CBO Director Douglas Elmendorf wrote in a letter to House Majority Leader Steny Hoyer on Saturday.

Peter Orszag, a former head of the CBO, responded at his blog in muted tones that, were they put into the language of professional wrestling, would approximately translate to "what you gonna do brother, when Orszagamania's running wild on you??!?!?!"

A final note is worth underscoring. 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.

Roughly translated, Orszag is saying that IMAC was never meant to create medium-term savings, because it has a long-term approach to determining cumulative savings over time. This is especially true because IMAC, under the plan, couldn't make recommendations until 2015, and the CBO only scored it through 2019. As to the long-term impact, it's near impossible to figure out what some individual recommendation would be in, say, 2024, let alone how much savings such a recommendation would realize.

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.

The White House is now in a tough spot, wanting to please Congress by pleasing the CBO but also wanting to please the public, when those goals are at cross purposes. They don't have to be. There are ways to produce more reform in ways that both cut costs and increase access. But if the CBO is going to play these kinds of games, it plays into this belief that the Obama plans spend too much and expand too much government. Relentless hits from Republicans and a lack of coordinated defense of the liberal philosophy of government from Democrats facilitated this. At some point, the President must not only defend his health care plan, but defend liberalism. Otherwise he will run into trouble.