Two reports recently released by the Congressional Budget Office, Key Issues in Analyzing Major Health Insurance Proposals, and Budget Options, Volume 1: Health Care, have dominated discussions this week.

Jane Zhang of the WSJ reported:

The Congressional Budget Office analyzed 115 options to change health care, some costly and others that would save the government and consumers some money.
…
Among the findings:

- If no changes occur, CBO says health care spending will rise to 25% of GDP by 2025 from 16% last year.

- If the federal government required all employers with more than 50 workers to provide insurance or pay a penalty, federal revenue would increase by $13 billion in four years and $47 billion over nine years.

- Allowing non-federal workers and companies to buy into the Federal Employees Health Benefits Program would cost the federal government about $2 billion over four years and $6.2 billion over nine years.

Ezra Klein explained the importance of these reports and the impact they could have on healthcare reform plans:

How do we decide how much a government program costs? It’s an essential question. Programs need prices, because the government has to produce a budget. But pricing legislation in advance is impossible… But you still need a number. So Washington operates amidst a tacitly agreed-upon imprecision. What the CBO says, goes. “In this town,” says Henry Aaron, a senior economics fellow at the Brookings Institution, “it’s not infrequent to hear people say it doesn’t make any difference what it really costs. It only matters what CBO says it costs.”

The books that the CBO released this week are essentially a guide to the CBO’s scoring process. They tell congressmen, in advance, how the Number will be built. The Wonk Room and The New York Times are focusing on the equations. But they’re not what’s changed. Rather, the difference is that Congress knows what they’ll be in advance. The scoring process will still be a minefield, but now legislators will have a map. There won’t be a situation analogous to 1994, when the White House was shocked by an unwelcome assumption and their legislation was mortally wounded by a staggering price point. Obama and his allies in Congress, along with Orszag’s help, will be able to build a bill able to survive the scoring process. They can, effectively, decide their own Number.

Bob Laszewski, of the Health Care Policy and Marketplace Review blog, summarizes what he believes to be the documents’ critical conclusions:

- There are no one, two, or even ten silver bullets. There are literally dozens of steps that will likely have to be taken in order to achieve the savings necessary to make our system more cost and quality effective.

- The politically easy stuff won’t get it done. Democrats and Republicans have said that things like prevention, wellness, and wider use of health information technology can free-up the savings we need to make our system affordable even while we dramatically expand the number of citizens covered. But the CBO confirms that these less politically problematic “cost containment lite” proposals won’t be enough: “…approaches—such as the wider adoption of health information technology or greater use of preventive medical care—could improve people’s health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary window.”

- Really controlling costs will be very hard and will require some courageous and politically problematic actions: “Those problems cannot be solved without making major changes in the financing or provision of health insurance and health care. In considering such changes, policymakers face difficult trade-offs between the objectives of expanding insurance coverage and controlling both federal spending and total costs for health care.”

- Changing what we pay will have far more potential to change the system’s costs than changing how we pay.

On Managed Care Matters, Joseph Paduda challenges that an important component of the CBO health policy study findings must not be overlooked:

There’s a lot in the study that’s very good, but much of the discussion has missed a central point. There is enough money in the system today to pay for excellent care for every American – probably more than enough. While we can save $110 billion over ten years by negotiating a 15% rebate on drugs covered by Medicare Part D and another $34 billion from efficiencies resulting from improved health care IT, these totals are chump change next to the amount of money we waste by delivering too much care to people who don’t need it.

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The CBO report suffers from a troubling omission – an explicit acknowledgment of the impact of over-utilization on US health care costs. While the authors provide an excellent analysis of a hundred-plus health reform initiatives, they do not address the elephant in the room – too many doctors prescribing too many treatments that have no basis in science, no demonstrated efficacy, deliver no benefit to the patient.

That’s where the money is. Yet the CBO study claims that savings from comparative effectiveness research would be tiny – and most of the benefit would take place more than ten years in the future. Where the study misses the mark is in assuming that the health care funding, regulatory, and delivery systems remain static. Without fundamental change, their numbers are likely correct, and may well be optimistic. That, I would suggest, is the point.

And, over at The Wonk Room, Igor Volsky reminds us that the conversation cannot only be focused on cost-savings measures:

After all, that’s what the government does: it spends money to avert disaster. We spend billions on protecting our homeland and bailouts of financial institutions. To somehow change the paradigm in the health care discussion and argue that reform is only possible if it’s budget neutral, completely affordable, or free, is intellectually dishonest. We don’t count the pennies we spend on securing our airports or argue that if we try to secure all of them we’ll bust the budget, and we shouldn’t penny pinch for affordable health care.

As the CBO points out, certain cost-containment measures will indeed contain costs. But to avert the consequences of inaction and help its citizens, the government will have to invest new dollars into health care. As with anything else, it will have to collect taxpayer money, find savings where it can, and then spend to improve the common good.

The consensus from the bloggers highlighted here and others from around the blogosphere is that the Congressional Budget Office is to be commended on publishing two accurate, insightful reports, but what is yet to be determined is what will come next and how the CBO findings will be reflected in the policies of this next administration.

This entry was posted on Wednesday, December 24th, 2008 at 6:37 pm and is filed under Consumer Health Care, Coverage Policy, HIT/Health Gaming, Medicare, Policy, Politics, Roundup. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.