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From CBO, a major buzz kill for health overhaul

This week, in the span of just 24 hours, the Congressional Budget Office issued three reports that effectively poured cold water on would-be reformers of the U.S. health insurance system.
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This week, in the span of just 24 hours, the Congressional Budget Office issued three reports that effectively poured cold water on would-be reformers of the U.S. health insurance system.

On Monday, the non-partisan budget-estimating agency totaled the preliminary costs for a health care overhaul bill proposed by Sen. Chris Dodd, D-Conn., on behalf of the ailing Sen. Edward Kennedy, D-Mass.

The CBO estimated that if the bill becomes a law, it would cause “a net increase in federal budget deficits of about $1.0 trillion” from 2010 to 2019. But according to the agency, the bill would still leave 37 million Americans uninsured by 2019.

President Barack Obama and congressional allies have pledged to cover the uninsured, while adding nothing to future federal budget deficits. So the CBO analysis has greatly rankled reform advocates.

The National Coalition on Health Care, an array of corporations and unions, reacted by saying “... all of us need to step back and take a deep breath. Health care reform is at the front end of a legislative process that will have many twists and turns.”

The coalition said it was wrong for critics to pounce on Monday's partial CBO assessment as definitive.

The budget office acknowledged that it was working from a draft of the Dodd-Kennedy bill.

The final legislation voted on by the Senate would likely include additional provisions missing from the draft, such as an expansion of Medicaid to cover more uninsured people.

CBO on $2 trillion in savings
On Tuesday, the CBO sent a letter to Rep. Dave Camp, R-Mich., the senior Republican on the House Ways and Means Committee — the panel which will write the tax legislation to help pay for health care redesign.

The $2 trillion in savings promised by health care industry executives who flocked to the White House last week “are no doubt welcome,” said CBO Director Douglas Elmendorf.

But, he added, “Most of the proposals are steps that do not require the involvement of the federal government or are not specified at a level of detail that would enable CBO to estimate budgetary savings.”

It was a reminder from CBO that if Obama and Congress intend to redesign health insurance in a way that doesn't add to the federal deficit, they can’t rely primarily on the private sector.

Instead, they will have to do it themselves by curbing the spending that the federal government can control, such as Medicare, which costs $500 billion a year and is growing at a rate of 7 percent annually.

The CBO also points out that there is a difference between total national health spending, which amounted to $2.2 trillion — or 16 percent of the gross domestic product in 2007 — and government spending on health care, which is about $1 trillion of that national total.

A sometimes muddled debate
Health care policy debaters sometimes talk about total national spending when they mean government outlays, and vice versa. But the two are not the same.

Some steps that would improve Americans’ health and thus help reduce national health care expenditures would require an increase in spending by the federal government — and thus would add to the federal deficit.

One example: Congress could give a tax break to companies that provide health risk appraisals for their workers and give incentives to employees with chronic illnesses to stay on their treatment plan.

This strategy would likely reduce the incidence of diseases such as diabetes and lead to fewer work days lost due to illness.

But the tax break would cost the federal government a loss of corporate tax revenue — and the CBO would rate the program as a revenue loser.

How to achieve cost savings
The CBO’s next discouraging news came Tuesday in a letter to Senate Budget Committee Chairman Kent Conrad, D-N.D., and the ranking Republican on the panel, New Hampshire Sen. Judd Gregg. It said that the savings from efficiency steps, like adopting the cost-effective treatments from the best hospitals nationwide, were not knowable in the short run.

“Unfortunately, little reliable evidence exists about exactly how to implement those types of changes — especially at the level of specificity required for legislation,” said Elmendorf.

He went further in the CBO blog post that accompanied his letter. The CBO has analyzed a number of options such as expanding the use of preventive and wellness services, he said. But, “at this point, experts do not know exactly how to structure such reforms so as to reduce federal spending on health care significantly in the long run without harming people’s health.”

Obama’s hope is that an overhaul of health care would reduce federal spending on health care, while improving people’s health. The CBO is reminding Congress of the gap between that hope and actual accomplishment; a deficit-neutral bill may require a lot of revenue through tax increases.

So even before its formal cost estimate of the entire health insurance bill, the CBO has already gotten the debate off to a daunting start for would-be reformers.

Savings may be there eventually, but they may not show up in the 10-year budget window that the CBO uses to do its estimates.

The CBO analyses this week underscored the fact that despite being a non-partisan agency, this office can have big political impact.

Joseph Antos, a former CBO health care policy official, said that Elmendorf, who has held his position since the beginning of this year, “is astute politically, but is not into the glitz and glamour of politics. He’s much more an analyst.”

This week’s CBO reports, he said, are “not a question of some political machinations to either help or hurt anything.”

Antos, who is now a health care analyst at the conservative think tank the American Enterprise Institute, said that the CBO this week was “pouring cold water on wishful thinking, which is what Congress always does.”