If you have been following my health posts closely over the past few months, then you should be ready for this analysis from CBO: Different Measures for Analyzing Current Proposals to Reform Health Care.

This is only for budding policy wonks who want to test their newfound comprehension of the arcane world of health budgeting.

I offer my compliments to Director Elmendorf and the CBO health team for this analysis. It is a fine example of how CBO has this year gone beyond what is strictly required of them and offered analysis to policymakers to make sure they really understand what they’re doing. If only more lawmakers would read it.

I offer three observations.

  1. CBO says that both bills would reduce the budget deficit in the short run and in the long run, but suggests they do so only by making Medicare payment changes that “may be” (I say are) politically unsustainable. Senator Reid tried to be hypocritical last week when he attempted to pass a freestanding bill to increase Medicare spending on doctors at the same time the health reform bill allows “cuts” to take effect. A majority of the Senate did the right thing and slapped this down.The House is headed down this same path. Because of the Speaker’s control over the rules, she is more likely to be successful in passing this hypocrisy. Question for those Blue Dog Democrats who will vote for the Speaker’s bill “because CBO says it reduces the deficit”: how do you justify the deficit-increasing impact of the combination of that bill with the doctor payment-increase bill? If the separate “doc fix” bill passes the House, whether or not you vote for it, then your vote for the Speaker’s health reform bill is a vote to increase the deficit.
  2. The last table in CBO’s analysis is instructive. It shows that the Senate Finance Committee bill slightly reduces the “federal budgetary commitment to health care” over a 10-year period. In contrast the House bill dramatically increases this commitment, by $598 B over 10 year and by $104 billion in the year 2019. That latter figure is enormous for a single year effect. The House bill reduces the deficit only by raising non-health taxes by a greater amount.How, then, can the President and his budget director argue that “health care reform is entitlement reform?” The good case (Senate bill) is one where the long-term federal commitment to health care is essentially unchanged. In the bad case (House bill), Congress would be massively increasing its budgetary commitment to health while raising unrelated taxes to hide it. If either of these bills become law, future entitlement spending pressures are far more likely to be addressed by enormous tax increases, including on the middle class. A vote for either bill is a vote to raise future taxes on the middle class.
  3. Kudos to CBO for this commitment at the end: “Finally, the question of what impact proposals might have on health insurance premiums is also of considerable interest. CBO intends to address that issue in the near future.” I can’t wait.CBO:
    • I hope you will incorporate the concepts embodied in Amy Finkelstein’s research in this analysis. Increased insurance coverage >> increased utilization of medical care >> higher health insurance premiums.
    • I also hope you will continue the precedent you established in the late 1990s when CBO estimated the effects on private health insurance premiums of mandates. CBO used to estimate that mental health parity mandates would increase private health insurance premiums. They made similar estimates for versions of the Patients’ Bill of Rights. You should do the same for these bills, in particular the effects of guaranteed issue and modified community rating on average private health insurance premiums. For this to be useful to policymakers, I hope you analyze separately the employer-sponsored and individual/exchange markets.
    • I hope you also show the effects of these premium changes on wages. After all, you and JCT need to do so to estimate the effects on the taxable wage base, no?

(photo credit: balance by hans s)