CBO Admits (Very Quietly) That HR 3200 Will Reduce Costs

Since I’m sure we’ll be greeted Monday morning with a chorus of opponents of reform citing the latest Congressional Budget Office pronouncement as proof that we should give up on health care reform, I thought I should call attention to the last two paragraphs of the document.  Last week, many took CBO Director Doug Elmendorf’s verbal testimony as proof that the current reform proposals in the House, the Senate and the White House would not appreciably reduce health care costs.  What, I wonder, will they make of CBO’s new pronouncement that HR 3200 would “achieve tens of billions of dollars in Medicare savings each year”?

The context:  Rep. Steny Hoyer asked the Congressional Budget Office to “score” the proposal to create an independent body modeled on the existing Medicare Payment Advisory Commission.  Since this new commission – IMAC – would be staffed with providers and experts, not politicians, they’d be empowered to make policy decisions to reduce Medicare spending unencumbered by political calculation.  The President would decide whether to implement their proposals each year as a package deal (no amendment or picking and choosing), and they would become law unless Congress passed a law to put them on ice within 30 days.  White House Office of Management and Budget Director Peter Orszag has championed this idea as a way to overcome political inertia and generate long-term savings.

CBO determined there may well be substantial long-term savings, but marginal short-term savings.  However, given the furor of last week, it’s striking that part of the reason why Elmendorf and his staff don’t believe IMAC will yield much short-term savings is because their recommendations will likely overlap with provisions in HR3200 that will already be reducing costs.  Full quote, with no elisions:

Several percent of annual Medicare spending would amount to tens of billions of dollars per year after 2019. By that point, H.R. 3200, as introduced, would already be on track to achieve tens of billions of dollars in Medicare savings each year, primarily as a result of provisions that would reduce payments to Medicare providers relative to those projected in the current-law baseline. (Total federal resources devoted to health care programs would increase under the introduced version of that bill, however, because of the provisions aimed at making health insurance available to more people.) Substantial additional savings from an IMAC-type proposal would probably require significant changes in coverage, benefit design, and payment and delivery systems aimed at reducing the quantity and intensity of services provided. Some of the savings that could be expected from such changes are probably already captured in CBO’s assessment of the long-term savings that would result from provisions of H.R. 3200, but it is difficult to assess the extent of that overlap.

Something to keep in mind as you hear pundits thundering that the CBO says health care reform won’t reduce costs.

(Photo credit:  Kevin on Flickr.)