The Wonk Room

In Defense Of My Argument Against The Congressional Budget Office

Over at the Washington Post, Ezra Klein argues that I overstated my (ongoing) case against the Congressional Budget Office. On Friday, after the CBO released its decision to exclude the federal mandate to purchase health insurance from the federal budget, I argued that we should not allow the CBO to hold health reform hostage. “Why exactly are [reformers] jumping through hoops to satisfy the CBO?,” I asked.

Klein writes that I went “a couple of steps too far“:

This is, I think, going a couple of steps too far. There’s no doubt that the Congressional Budget Office is a pain in the neck for health reformers. But that’s not the fault of the Congressional Budget Office. It’s because the cost of health reform — at least in the plans under consideration — is a pain in the neck for health reformers. Attacking the CBO is like attacking the guy who writes the numbers on the price tag…. Reformers fear CBO’s honest estimates, however, because they recognize that the opponents of reform will use them dishonestly.

I fully recognize that the cost of reform is the “real pain in the neck for health care reformers.” $1.5 trillion over 10 years ain’t chump change and my post was not intended to obfuscate the fact that comprehensive health care reform would require a serious upfront investment. Nor was it prompted by my “fear of CBO’s honest estimates.” Rather, I was highlighting the deficiencies within CBO’s accounting process. I’m not attacking “the guy who writes the numbers on the price tag,” I’m questioning how “the guy” comes up with the numbers in the first place.

As CBO chief Doug Elmendorf admitted during a recent Senate Budget Committee hearing, “we have very little evidence about interlocking changes in the complex health-care system, and I don’t think that our numbers should be the ultimate determinant of the policies that you and your colleagues will vote for and against”:

WHITEHOUSE: And I have two concerns about your actuarial science. One, there is a limited amount of evidence, and so you’re very limited in what you can sign off on in terms of scoring. And two, areas that we’ve been talking about like health information infrastructure and investment in quality reform that saves money and reimbursement reform end up being dynamically inter-engaged. [...]

ELMENDORF: I agree entirely with your concerns, Senator. CBO is going to draw on existing evidence about the effects of changes. And that evidence will be weak in many cases, and it will be particularly weak in cases that involve the interactions of several policy changes. We have a fair amount of evidence related to incremental changes that, on policies that have been in place for a long time, because almost everything has been moved up and down, and you can see how the world has responded to that. We have very little evidence about interlocking changes in the complex health-care system, and I don’t think that our numbers should be the ultimate determinant of the policies that you and your colleagues will vote for and against.

WHITEHOUSE: We’ll have to make some leaps of faith based on our best judgments.

ELMENDORF: Yes. Now, however, let me say I think we can be of great service to you in judging what leaps are worth taking.

Put simply, the fear is that the CBO understimates the savings from health care reform. It has a hard time identifying long-term savings, doesn’t consider the ledgers of businesses or families — who would benefit from progressive prescriptions — and has some serious scoring problems. For instance, health care reform would improve the health of the population, increase workers’ productivity and in turn yield greater revenue. The CBO does not score these savings. Klein is correct to note that this isn’t the CBO’s fault — Congress demands exact numbers and so the CBO tries to come up with ballpark estimates.

As Robert Reischauer — the CBO head from 1989 to 1995 — put it after one member of Congress wished to know if the CBO’s estimates about President Clinton’s health care reform plan were “in the ballpark,” “Congressman, I believe that we are in the town the ballpark is in. ”