"CBO Strikes Again"

by Pejman Yousefzadeh on July 26, 2009

That is the title Yuval Levin gave to his post, concerning the implementation of the Independent Medicare Advisory Council, which the Obama Administration is relying on to provide savings and increase efficiency in the provision of health care. As Levin reports, the CBO’s best estimate is that IMAC will provide only $2 billion in savings from 2010-2019, with the savings coming between the years 2016 and 2019.

Needless to say, this is pathetic, and a far cry from the way in which OMB Director Peter Orszag advertised IMAC:

The Independent Medicare Advisory Council (IMAC) would be an independent, non-partisan body of doctors and other health experts, appointed by the President, confirmed by the Senate, and serving for five-year terms. The IMAC would issue recommendations as long as their implementation would not result in any increase in the aggregate level of net expenditures under the Medicare program; and either would improve the quality of medical care received by the program’s beneficiaries or improve Medicare’s efficiency.

As with the military base-closing commissions, this proposed legislation would require the President to approve or disapprove each set of the IMAC’s recommendations as a package. If the President accepts the IMAC’s recommendations, Congress would then have 30 days to intervene with a joint resolution before the Secretary of Health and Human Services is authorized to implement them. If either the President disapproves the recommendations of the IMAC or Congress passes such a joint resolution, the recommendations would be null and void, and current law would remain in effect.

This approach would free Congress from the burdens of dealing with highly technical issues such as Medicare reimbursement rates while rightly giving them, your representatives, a say in the matter. Moreover, this kind of body would enable the health care system to respond to a very dynamic market and technical landscape, making Medicare policy more responsive and effective in the future. All together, the IMAC proposal would make sure that there is someone always on the beat, looking for ways to bend that curve.

So much for that plan. As Ezra Klein notes, while trying to put the best gloss possible on the CBO’s findings, Orszag is, in fact, quite angry:

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.

Klein himself states that the effects of IMAC are too far off in the future for us to be able to gauge them with any degree of certainty here, now, in 2009. This may well be the case–I am prepared to assume that it is–but it shows just how many “known unknowns” (to use a Rusmfeldism) we are dealing with in crafting health care reform legislation. Add to this degree of uncertainty the fact that until late in the past week, we were trying to pass health care reform before Congress skedaddled out of Washington for its August recess, and you have a glimpse into what is a terrifyingly chaotic policy process. To think that the Obama Administration was trying to ram through massive changes to the health care structure–and the economy as a whole–with so many questions unanswered beggars belief.

Of course, we all know that Peter Orszag is deeply political, and that he will pull whatever political strings are necessary to pass health care reform, irrespective of the “known unknowns” out there that are yet to be answered. After all, the Obama Administration and its allies look at the question of health care reform in expressly political terms:

“Success breeds success, and failure does the same,” says former Senate Majority Leader Tom Daschle, who was Mr. Obama’s first choice to be health secretary before he withdrew from consideration. “To fail on this would really be a terrible blow to the agenda.”

“Failure,” of course, means “the inability to pass a bill.” The need to pass a bill has driven the Obama Administration to questionable analyses concerning health care reform–and as befits a good political soldier, it is up to Peter Orszag to put out the fires that result when someone calls shenanigans on the Administration’s policy arguments:

Last month, after Libertarian writer Virginia Postrel, in a blog posting, called a White House health-savings report “remarkably disingenuous,” Mr. Orszag got her on the phone. Ms. Postrel had written that the administration could improve Medicare payment policies without applying the savings to covering the uninsured.

In public, Mr. Orszag often makes the case that there is a moral imperative to cover the uninsured. But over the phone, he told Ms. Postrel that, politically, it’s impossible to do it any other way. Ms. Postrel wrote on her blog that Mr. Orszag said that the powerful senior group AARP wouldn’t accept Medicare cuts unless the money went toward expanded coverage.

And there is this:

At the CBO, his focus on health-care costs drew some criticism. Last year, when he was still the organization’s director, he called Andrew Biggs of the conservative American Enterprise Institute into his office to dispute a paper Mr. Biggs had written. Mr. Biggs argued — and still does — that the aging population, not health care, is the biggest driver of the federal deficit.

“It’s like you’re going to the principal’s office,” Mr. Biggs says. Mr. Orszag accused him of impugning the integrity of CBO’s professional staff, Mr. Biggs says. “I’m wary about tangling with him,” Mr. Biggs says. “He’s very, very aggressive, and he’s very, very bright.”

All of these efforts to tamp down dissent notwithstanding, it is clear that the Obama Administration’s expectations concerning savings from health care reform are just not being met. Expect more policy critiques concerning the Administration’s health care reform proposals to come out during the August recess, as both sides prepare themselves to battle anew over health care reform. Expect Peter Orszag to have to pacify or shout down critics. The White House is not going to let up on gamesmanship as it continues to try to enact its chief domestic policy priority, even as the evidence mounts that the White House’s approach is fundamentally flawed.

  • http://twitter.com/paul_fuller EPU

    This Orszag character is going to be a busy, busy boy in August. He may find it doable to intimidate Congressmen like the blue dogs, but he'll get no play with the great unwashed masses, who simply do not care to parse whatever skilled argument he's trying to make.

    And those great unwashed will spend the August recess leaning on their Congressmen in a very tangible way.

    Orszag FAIL.

  • http://twitter.com/paul_fuller EPU

    This Orszag character is going to be a busy, busy boy in August. He may find it doable to intimidate Congressmen like the blue dogs, but he'll get no play with the great unwashed masses, who simply do not care to parse whatever skilled argument he's trying to make.

    And those great unwashed will spend the August recess leaning on their Congressmen in a very tangible way.

    Orszag FAIL.

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