The Obama budget team has made it clear they are going into the next federal budget process playing it straight on many fronts that the prior administration had fudged on. The
cost of the wars, the cost of adjusting the alternative minimum tax
each year to keep the middle class from falling into it, the cost of
disaster relief, and the cost of avoiding the otherwise automatic cuts
to Medicare physician fees because of the Sustainable Growth Rate (SGR) formula were all conveniently left out of the Bush budgets making them look a lot better than they really were.

Facing a $1.5 to $2 trillion deficit this year
you might as well throw the lot on the pile, get it over with, and
create an even greater imperative for change—a trillion here a trillion
there "and pretty soon it gets to look like real money."

In the end an honest accounting is all to the Obama administration’s credit.

But on the health care front anyway, it may also be very shrewd politics.

Suddenly, the cost of Medicare becomes a lot higher over the next ten years. If the budget now reflects that none of the expected SGR cuts will be made to Medicare physician payments that would put the nation’s ten year health care bill about $320 billion higher than current calculations—using the CBO’s December cost option report
to gauge the impact. If you assume the docs would have gotten a
Medicare Economic Index increase each year the additional cost is
closer to $600 billion.

So, the budget baseline increases just before you put your health care reform plan
on the table. Any cost or savings calculations conveniently occur from
the higher baseline and the cost of the proposed health plan looks
smaller than it would have because you already have much of the doc fix
factored in before your new plan takes effect.

Suddenly, the Obama health plan's solution to the Medicare physician fee issue
is at least not costing as much as it would have and is maybe even
saving some money rather than costing money as it would have under the
old budget assumptions!

Either way it's all spin of course. The
cost is the cost. And, this is a much more honest cost basis than we
have had—just as long as we don’t lose track of the numbers!

But it’s also a lot easier to spin from a number $300 billion higher than it would otherwise have been.

Geeez, this Orszag guy is good.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog.

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3 Responses for “Raising the Price Before You Put It On Sale”

  1. Greg Pawelski says:

    Two years ago, CBO Director Peter Orszag told Congress that the previous administration had the nation on an unstable fiscal path with its desire for a Korea-like, enduring occupation of Iraq. The higher debt and interest costs was going to cause severe economic dislocation, which were exacerbated by war costs. The “real” costs of the war were much higher than anticipated.

  2. bev M.D. says:

    Assuming your facts are correct, he is not “raising the price”, he is correcting a previously inaccurate price.
    We may as well know the hard facts of life – to wit, the government can never keep its promises, either way.

  3. Sadly, it has become a common business practice to create metrics to make one get what they want. Biz school teach it as a tool to achieve the goal. Why blame Bush, it is the cultural unfolding infront of us inthe wallstreet.
    While a good metric is important, the good may be debatable. The key is to get as good as you can. The management is mostly on consistency in the measurement is more important.

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