As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Sunday, August 02, 2009

Who Died And Made The CBO Boss?

The CBO has been given a reputation throughout the health care debate as being the unassailable arbiter of the facts. If you submit them a plan, they will tell you to the letter how many people it will cover, how much it will cost, and whether it will drop overall costs for the nation and the federal budget. Give them a program for emphasizing prevention? They say sorry, it doesn't save any money. Give them a plan for an Independent Medicare Advisory Council to use best practices in Medicare to bring down overall costs and hopefully provide a path for the overall health care system? Sorry, not much savings there either.

What rarely gets discussed, at least in the traditional media, is whether or not the CBO should be trusted with so much power over the details of any legislation, let alone health care reform, where they appear to have a poor track record.

Put most simply, the CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded government health care benefits and underestimated the savings from program changes designed to reduce expenditures. Most recently, it overestimated the five-year cost of Medicare Part D — the prescription drug benefit -— by more than 35%. Even more dramatically, the CBO’s estimates of the Medicare savings from the Balanced Budget Act of 1997 underestimated the impact, on average, by a full 100%. That’s right: In the BBA’s first three years, Medicare spending fell fully twice as fast as the CBO had projected.

Doug Elmendorf, who has been criticized by former CBO Director and current head of the OMB Peter Orszag, has veered perhaps too closely into a role of playing favorites over his preferred options in how to handle health care reform costs rather than the neutral, just-the-numbers arbiter of what certain plans would mean in dollars and cents. Heck, in the "Gang of Six" meetings in the Senate Finance Committee, the furthest to the right in the whole Congress, Elmendorf has been an active participant.

Now, this may be less of a slam on the Congressional Budget Office itself as much as a political and media process that privileges their judgments as if they were gospel and not the often-conservative estimates of an organization loath to over-promise.

I don’t really think the CBO should change its methods. You need the CBO do be methodologically conservative in terms of what it’ll score or else all kinds of monkeybusiness can start flying through congress. Instead, let me join Ezra Klein in saying we should leave the CBO as it is and just discourage people from wildly misrepresenting the significance of CBO findings.

What you actually need is for politicians to step up and make independent judgments about what they want to do. Doug Elmendorf has decent reason for not wanting to promise that MedPAC reform will lead to vast savings. But members of congress actually serve in congress, and it would be eminently reasonable for them to reach the conclusion that the CBO is underrating how dramatically the proposed reforms would alter congressional behavior. The point is just that if members of congress want to reach that conclusion, they ought to do so under the banner of their own names and own judgment about the politics and policy.

Politicians are notoriously small-c conservative creatures themselves, in that they'd rather be armed with independent evidence before going out on a limb. And the CBO has come to represent that independent arbiter, used for political cover. Only it's a small-c conservative outfit as well. And so the entire debate gets pushed in a conservative direction because politicians will only counter the CBO when it comes to handing out tax breaks for rich people.

...the New York Times op-ed page makes largely the same point:

The budget office provides vitally important guidance to Congress, but focuses primarily on how new legislation might affect federal spending and federal deficits. The office gives only a cursory glance at how reforms might cut costs for the overall system and yield savings for employers, families and state and local governments, the issue that concerns most people.

Moreover, the office makes middle-of-the road estimates of cost and more pessimistic estimates of savings. That makes sense (lawmakers and government agencies routinely exaggerate the virtues of their proposals), but it makes it harder to evaluate proposed innovations.

Respected analysts who are not bound by the C.B.O.’s conservatism have projected significant savings from reforms that the C.B.O. scores poorly. The Commonwealth Fund, a research organization, and David Cutler, a Harvard health economist, separately estimate that an array of reforms could save the government hundreds of billions of dollars in the first decade and the health care system even more. These estimates, coming from advocates of reform, may be too rosy, but underscore the point that the C.B.O. may undervalue savings.

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