The Meaning of Those CBO Numbers

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Congressional Budget Office (CBO) numbers released at the end of last week gave the House Democrats the ammo they were looking for: their revised health bill would reduce the deficit by about $138 billion in the first ten years, and by $1.2 trillion in the second decade. What’s more, the total package comes in at $940 billion—below the magic $1 trillion mark that Team Obama had been targeting. Kind of sounds like the $9.99 trick merchants use, doesn’t it? A jubilant Nancy Pelosi called the bill “a triumph for the American people in terms of deficit reduction.”

Deficit reduction is not to be confused with lowering the cost of the nation’s total medical tab. Without explanation, it’s easy for those Americans to confuse the two, given all the talk about making health care affordable and reducing the price of medical care. Headlines like this one in The New York Times—“Democrats Gain With a Promise on Health Costs”—don’t help. “The CBO calculates the impact of health reform on the government budget not on the cost of medical care,” Yale professor emeritus Theordore Marmor told me. “The savings are in the public sector. The evaluation is inconsistent with the way the problem (sky-high medical costs) has been defined.”

That raises a question that will be all but obscured in the hoopla over the passage of the bill Sunday. With the government paying less for medical care under the Medicare program, will doctors and hospitals simply raise their prices to make up for any fee shortfalls from the federal government?

The CBO’s numbers, as good as they may be, are simply projections based on what is known at the moment the number crunchers do the crunching. “False precision of this produces illusory forecasts which distort sensible conversation about what we can reliably say,” Marmor continued.

Kudos to the NewsHour for offering viewers a sensible conversation, touching on Marmor’s concerns and presenting new thoughts here and there. The program was a face-off between former Obama official Neera Tanden, now at the Center for American Progress, who spun the rosiest picture of the CBO numbers, and Gail Wilensky, an old Medicare hand, who often gives more conservative points on shows like these.

Right off the bat, Wilensky acknowledged that CBO’s numbers are well regarded as unbiased but noted they are “frequently wrong.” She further explained that, when it calculates its estimates, the CBO must look at what is in current law and nothing else. What was missing from its estimates, she said, was the government’s forthcoming gift of $230 billion to the doctors. Congress has delayed bestowing its gift for political reasons, perhaps because it is an amount that is almost twice the projected savings in the law’s first ten years of operation.

The doctors, as Campaign Desk has reported, are supposed to have their fees cut by 21 percent, as part of a deficit reduction plan mandated by Congress over a decade ago. But each time the cuts were to take effect, physicians mobilized and staved them off. Now the Senate has postponed repeal of the cuts until the end of April, well after the legislation will be signed into law. A very comfy cover for the pols, no?

But word is leaking out. Wilensky told NewsHour viewers:

The reason it’s so important is, so much of the savings is coming out of Medicare payment reductions, that Congress is getting every single penny they think politically they can get out of Medicare, but they’re not paying for the fix to physicians. That ought to be regarded as a very serious problem.

Apparently, it is so serious that a memo obtained by Politico told the Dems:

Do not allow yourself (or your boss) to get into a discussion of the details of CBO scores and textual narrative. Instead, focus only on the deficit reduction and number of Americans covered.

House Majority Leader Steny Hoyer asked Politico to remove the memo, saying it was a fake, and did not come from Democrats. When Politico could not confirm the authenticity of the memo with republican sources, it agreed to remove it from the Web site. Politico reported that the doctor fix was still in the wings, but “Democrats haven’t exactly been trumpeting that fact ahead of the vote, because Republicans would have pounced on it as evidence the Democrats’ health reform efforts aren’t really deficit-neutral.

After Wilensky raised the pesky issue of the doctor fix, Tanden insisted that that there were indeed savings in the bill—conflating, as Marmor suggested, deficit reduction with reducing the nation’s total health care bill. She talked about how the CBO had not given sufficient credit for a “range of savings proposals in the bill that they give very little credit for zero—say it will save zero or a few billion dollars.”

“You mean it should look even better?” asked host Jeffrey Brown. Tanden said yes. It would have been good if Brown had followed up and challenged Tanden about that old canard—savings from preventive care and information technology. Actually, as we’ve pointed out preventive care and health IT save very little, and in the end may end up costing money. But then the media has been reluctant to discuss any of that this past year, helping to perpetuate the notion of great savings over the decade.

Brown then tossed the ball back to Wilensky, and the conversation turned to other provisions that the president and the pols are banking on to produce more savings. Wilensky burst the bubble, explaining that the much ballyhooed programs, like bundled payments to doctors and other Medicare payment reforms, are simply pilots—attempts to figure out how to do things differently. “The history is,” she said, “promising pilots frequently don’t make it into law.”

She mentioned the excise tax on Cadillac health plans, which she said had been “emasculated,” and she cast doubt on the proposed Medicare payment advisory commission. “Basically, everything has been taken out of its purview,” she told Brown.

So as Wilensky tried to set the record straight and pierce the spin of the Obama folks, the rosy CBO predictions propelled reform closer to passage. In the end, the facts didn’t matter. Passage came down to raw politics. It always does.

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Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for CJR's Covering the Health Care Fight. She also blogs for Health News Review and the Center for Health Journalism. Follow her on Twitter @Trudy_Lieberman.