The Skunk at the Picnic Where “Kumbaya” Is Being Sung?
June 11th, 2009 . by economistmom
There was a great story about Congressional Budget Office Director Doug Elmendorf and the difficult position he’s in regarding CBO’s job of “scoring” health care reform, in today’s Washington Post. The story’s explanation of CBO’s history and reputation, combined with the wit of a former director, leads to the title of this post.
Why is scoring the cost of health care reform so difficult? Both because of the technical challenges (we can’t look to past experience) and because of the political challenges (who wants to rain on a very popular president’s parade?). As reporter Lori Montgomery, and Doug himself, explain:
The point on which Elmendorf’s opinion is most eagerly awaited is whether changes in the delivery of health care — more prevention, better information, closer coordination among doctors — can wring some of the waste out of a system expected to consume nearly $2.3 trillion this year. Reformers argue that up to 30 percent of that spending does little to improve health. If it were eliminated, the savings could be used to cover the 46 million Americans who lack insurance.
The problem is that nobody knows exactly how to eliminate that spending. And so far, the CBO has proven unwilling to assume big savings from popular reforms, such as computerizing medical records and studying the comparative effectiveness of various treatments. The CBO has estimated, for example, that requiring doctors and hospitals to use electronic records would save the government only about $34 billion over the next decade — a small fraction of the overall cost of reform, which is expected to exceed $1 trillion…
Elmendorf acknowledged that health reform is especially challenging. The CBO is much better at measuring incremental changes than measuring fundamental reforms, which, by their nature, require the agency to make decisions based on scant or preliminary evidence. A team of 50 people is working on health reform, in consultation with a panel of 21 outside experts. All recognize the fine line the CBO must walk, Elmendorf said.
“It would be wrong for us to be conservative, in the sense of tilting toward zero, because we don’t know” how much money an idea might save, Elmendorf said. “On the other hand, we need to not get swept up in the enthusiasm for some new idea, because not every new idea works.”
Why is scoring the cost of health care reform so difficult? Both because of the technical challenges (we can’t look to past experience) and because of the political challenges (who wants to rain on a very popular president’s parade?).
True. Scoring the cost of health care reform is important but we need to keep in mind how imprecise that scoring can be. For example, the Washington Post article states the following:
But forecasting the truth can be tricky. O’Neill concedes that her economic forecasts were too conservative — there was no way to predict the dot-com boom of the late 1990s. And Holtz-Eakin’s score for the drug program was too high: The program has been more popular and less costly than anyone imagined, and the CBO recently lowered its 10-year estimate from $634 billion to $395 billion.
It would seem prudent to design health care reform in a way that recognizes the imprecision of the CBO scoring. Those parts that are deemed to be most critical (such as catastrophic health insurance) or most likely to be cost-effective (health education and preventive medicine) might be part of the initial reform. But all less-critical reforms could be phased-in when and if the projected savings actually materialize. As we are now seeing with the Bush tax cut, it’s very difficult to undo a tax cut or new entitlement regardless of how the projections on which they were based may change. We need to avoid making the same mistake with health reform.
All talk of health care reform is absolute twaddle without MANDATING health care insurance companies actually pay hospitals for 100% of the work they already do.
Do we as a nation want health care cost for the individual consumer to be low.. or do we want expenses for health care insurance companies to be low? Currently, the choice is clearly the latter.
Hospitals receive compensation for no more than 3 out of every 10 patients they have already discharged. If you wonder why your ED bill (or MRI, or cath lab, etc) is high.. Congressional regulators pointedly refuse to enforce the laws on the books.
The money exists - in the salaries and bonuses of health care insurance execs.
Why is a 1% margin on revenue a GOOD measure for hospitals? Because those dollars which should be going to hospitals are being siphoned off by health care insurance companies.
Want to cut cost? Force health care insurance companies to pay up.