Democrats Paid a Steep Price For Ignoring the CBO. Republicans Will Too.

Democrats Paid a Steep Price For Ignoring the CBO. Republicans Will Too.


Eight years ago it was Democrats who were criticizing the Congressional Budget Office. Now it’s Republicans who are bashing the CBO for estimating that 14 million Americans will lose their health insurance next year if the House Republicans’ “repeal and replace” bill becomes law.

The media and the blogosphere have done a reasonably good job of debunking the Republicans’ criticisms of the CBO. Any citizen paying attention can discover that although fewer people enrolled in the Obamacare exchanges in 2014 than the CBO predicted in 2010, the CBO correctly forecast that the uninsured rate would fall by about half and that employers would not stop offering health insurance. The attentive citizen can also discover that the CBO’s predictions were more accurate than those of many other experts.

The media has also reported that Democrats leveled their own unfair criticisms against the CBO back in 2009 and 2010. Obama, Nancy Pelosi, and Max Baucus, to name just a few prominent Democrats, criticized the CBO for not giving the alleged cost-containment provisions in the Affordable Care Act more credit.

I want to make three points here that I have not seen made elsewhere:

(1) The criticism that both Democrats and Republicans make of the CBO consists almost exclusively of raw opinion, usually delivered in a huff, and almost never cites or discusses research;

(2) The CBO may have been off in predicting how many people would enroll in Obamacare and Medicaid, but it was accurate in predicting the failure of the managed care fads written into the ACA to cut costs; and

(3) Today, more than ever, America needs the CBO because the CBO adheres to the quaint principle that evidence should trump ideology.

Democracy thrives on rational debate, not whining and dodging

What I find offensive about the Democrats’ criticism of the CBO in 2009 and 2010, and Republicans’ criticism now, is the near-total absence in their critiques of any discussion of the evidence the CBO relied on to make its predictions. It’s one thing to engage in a civil dialogue about evidence; it’s totally another just to sit back and bitch. When, for example, in 2009 Senator Max Baucus badgered then-CBO director Doug Elmendorf about the CBO’s estimates of the non-existent savings in what would become the ACA, Baucus did not seek to engage Elmendorf in a discussion of the evidence behind ACOs and the other managed care fads the Democrats were counting on to cut costs. No, Baucus demanded that Elmendorf not play “God,” whatever that meant, and to be “creative” in his calculations of the ACA’s ability to cut costs.

Today Republicans are doing exactly what Democrats did eight years ago – they’re whining rather than telling the public what it is about the CBO’s methodology they disagree with. The closest Republicans have come to discussing methodology is to accuse the CBO of overestimating the coercive effect of the ACA’s individual mandate (the penalty for not buying health insurance) while carefully dodging the fact that the House bill substantially reduces the subsidies available to lower-income people that make health insurance more affordable. Ok, so you think the Obamacare mandate was less effective than the CBO thought it would be? Fine. Tell us why. Republicans won’t do that. [1]

CBO never drank the managed care Kool Aid

We all know now that the CBO, like every other agency, think tank and human being, failed to estimate accurately in 2010 how many Americans would buy insurance through the exchanges come 2014 despite an intelligent and good-faith effort. But almost no one has given the CBO credit for accurately predicting that the managed care cost-containment nostrums written into the ACA (including ACOs, “medical homes,” penalties for “excess” hospital readmissions, and lower out-of-pocket costs for preventive services) would save little money and might even raise costs. CBO’s only reward for that prediction was criticism from Democrats in 2009 and 2010.

Since at least the early 1990s when the CBO issued several reports on how it would score any legislation relying on managed care proposals, the CBO has never succumbed to managed care hype. There have been a few near exceptions (the CBO was a bit too optimistic about staff model HMOs in the 1990s), but by and large the CBO has been immune to the groupthink that propelled managed care theology to dominance in the American health policy debate four decades ago. The CBO has never said, for example, that prevention or “coordination” or ACOs will cut costs. They have refused to make such statements despite enormous pressure – both direct pressure from politicians and the indirect pressure of groupthink – to do so. They have refused because they insist on basing their decisions on evidence.

The CBO’s reliance on evidence has placed them on a collision course with the managed care movement and all the politicians who listen to managed care advocates. Since the earliest days of the managed care movement, managed care advocates have given high priority to their own opinions and low priority to evidence. (For a discussion of the managed care culture and its low regard for evidence, see my comment here )

Let me illustrate how different the culture of the managed care movement is from CBO’s culture by quoting statements made by President Obama and Doug Elmendorf, the CBO’s director from 2009 to 2015, about the myth that prevention saves money. According to a 2009 Politifact article , Obama asserted, “Insurance companies will be required [by the ACA] to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies…. That makes sense, it saves money….” Elmendorf replied: “The evidence suggests that for most preventive services, expanded utilization leads to higher, not lower, medical spending overall.” Note which of those two men used the word “evidence.” It wasn’t Obama. [2]

And what does the research say? A review of the literature by Joshua Cohen et al., published in the New England Journal of Medicine, concluded, “Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” Cohen et al. noted that the “prevention saves money” myth was fueled in part by what I have called the “free lunch syndrome”  – the pretense that the proposed managed care intervention is free.

Precisely because the CBO relied on research while the liberal critics of the CBO relied on managed care folklore, the CBO’s predictions of how the managed care fads in the ACA would perform were far more accurate than those of Obama, Baucus, Nancy Pelosi, Barbara Boxer, Peter Orszag, et al. The CBO’s December 2008 report estimated ACOs would cut Medicare’s costs by a tenth of a percent (see my discussion of this report in this THCB post ). That was remarkably accurate. Today (almost a decade later) we know CMS’s Pioneer ACOs have cut Medicare’s costs by a magnificent one-tenth to seven-tenths of a percent over their first four years (that’s not counting the costs the ACOs incurred) while the much larger MSSP ACO program has raised Medicare’s costs by about two-tenths of a percent (again, not counting the costs the ACOs incurred) over the same period.

As Republicans gnash their teeth about the CBO’s failure to estimate exactly how many Americans would enroll in the exchanges, let us not forget how accurately the CBO predicted the performance of the managed care programs in the ACA. That was impressive. It is further evidence that the CBO’s loyalty is first and foremost to evidence, not groupthink, not Democrats, not Republicans.

Democrats and Republicans should celebrate an independent CBO

The health policy debate, like the debate about virtually everything else, has become even hotter and more polarized than it was a decade ago. We need the CBO’s independent, evidence-based judgment now more than ever. But like democracy and trust in institutions, the CBO’s independence cannot be assumed. It must be nourished – diligently and always. CBO’s 200 employees are human. We should not assume they can resist any and all groupthink no matter how suffocating, and any and all political pressure no matter how threatening.

If we are to retain an independent CBO, leaders of both parties must stop bashing the CBO and start celebrating its commitment to evidence-based health policy. I am not equating intelligent, evidence-based disagreement with “bashing.” I have had my own disagreements with the CBO (for example, I thought the CBO’s conclusion that somewhere between zero and 10 million Americans would be insured by the over-hyped “public option” was too generous). By “bashing” I mean accusing the CBO of “playing God,” of being “socialist,” or otherwise attacking the good faith or intelligence of CBO’s staff while simultaneously refusing to engage in a debate about the research the CBO relied on.

Donald Trump poses a new threat to the CBO. Trump has demonstrated repeatedly that he is willing to sabotage institution after institution (the national intelligence agencies, the Department of Justice, NATO, the media, and the courts). With the release of his budget, it’s now clear he is willing to destroy or cripple any government agency he doesn’t like. This does not bode well for the CBO.

To give you some idea of what it feels like inside the CBO when the threat level rises to uncomfortable levels, let me relate to you a disturbing tale told by Haynes Johnson and David Broder in The System, their book about the rise and fall of the Clintons’ Health Security Act. The year is 1994. Robert Reischauer, a Democrat, is the CBO director. The CBO is preparing an analysis of the Health Security Act, the Clintons’ ponderous “managed competition” bill. One of the issues the CBO must decide is whether the expenditures on insurance by alliances of employers the Clintons call “health insurance purchasing coalitions” should be considered private or public spending. The Democrats want the CBO to declare the expenditures to be private and therefore off-budget. Republicans argue the expenditures would be mandated by federal law and should therefore be treated as on-budget spending. The pressure on Reischauer from both sides has reached white hot intensity over the last few weeks.

Here’s how Johnson and Broder described the pressure and how badly it rattled Reischauer and his staff.

“I received numerous phone calls,” Reischauer said…, “from people of great fame and with common household names telling me what they thought the right answer to the question was and questioning why I would have the audacity to decide otherwise. I also got probably a quarter as many phone calls from the other side [Republicans] who said they were sure we had caved in to the administration, and that our institution was going to be marked for its entire life because of this.”

Some who called accused him of trying to destroy a president. Others angrily warned him that if health reform died because of an unfavorable CBO verdict, children would suffer, and some would die. That’s going to be on your conscience, he was told…. For Reischauer, the worst moment came at nine o’clock on a Sunday morning, shortly before his report was to be released.… The phone rang. His wife answered. It was Ted Kennedy.

Kennedy was furious…. For nearly half an hour, Kennedy assailed Reischauer, bellowing his outrage. Reischauer was going to bring down the Clinton administration. Here was a president with a once-in-a-lifetime opportunity to do something as historic as health reform, and you, a minor staff official, are taking it upon yourself to thwart the will of the American people…. You aren’t elected….. Who are you to say this isn’t private insurance? Who are you to say whether this is on budget or off budget?….

Reischauer was shaken. He had never experienced such a tongue-lashing….
As the time for the decision neared, Reischauer summoned his executives to a meeting at seven o’clock at night in his office. Panic had set in at the White House….

Reischauer spelled it out for his executive staff. This is such a controversial issue, he said,… with such high political overtones that there almost certainly will be institutional repercussions. The political environment was so highly charged, he told them, that there was a good chance CBO could see its budget eliminated or slashed to a point where none present would be interested in working there. He wanted to make sure they understood the stakes; and be certain, also, that they fully discussed the most controversial part of their report and came to a decision about it: the chapter in their projected seventy-seven-page report that described the proposed health alliances as governmental activities financed with government funds.

For an hour and a half that night the CBO executives discussed the issue. Then Reischauer gave each a piece of paper. “I want you to vote yes or no,” he said.
Every person voted yes. There were no dissenters. They voted to include the chapter in the report even if it destroyed their agency and their jobs.
This triumph of principle over politics was never reported; their deliberations, and their vote, remained private. (Haynes Johnson and David S. Broder, The System: The American Way of Politics at the Breaking Point, 1996, pp. 285-86)

Could such abuse occur today? Of course it could. In today’s environment, would the outcome be the same? Would “principle prevail over politics” if the bullying were accompanied by a bona fide threat to cut the CBO’s budget?

I’ll settle for self-interest

In today’s environment, I realize it’s asking a lot of elected officials to stop bashing the CBO and to start promoting an evidence-based discussion. But if politicians and others with access to the media cannot find it within themselves to act altruistically, then I beg them to act in their own self-interest. It is not in the self-interest of either party to reject the CBO’s findings and then enact legislation that cannot do what its proponents claim it can do.

Democrats should have thanked the CBO for warning them that the managed care fads in the ACA would not cut costs. Instead they grossly exaggerated the cost containment in the ACA and crammed the ACA through Congress. Voters were not fooled. Voters handed Democrats their rear ends on a platter, in large part because they were not happy with the ACA. [3]

Similarly, Republicans should be grateful to the CBO for warning them the House “repeal and replace” bill will throw tens of millions of Americans to the wolves. Republicans can bash the CBO all they want, but voters will not be fooled. And when they discover Republicans tried to fool them, they will hand Republicans their rear ends on a platter.

Democrats and Republicans should make a vow now to swear off abusive remarks about the CBO and to pay close attention to the CBO’s findings. If they can’t bring themselves to do that for the love of truth and love of their country, they should do it for love of their own rear ends.

[1] In order to predict in 2010 how many people would be insured through the Obamacare exchanges come 2014, CBO staff had to familiarize themselves with research on (1) compliance with mandates (such as laws requiring the purchase of automobile insurance), (2) what economists call the “price elasticity of demand” for health insurance, and (3) economic models that predict multiple economic variables such as recovery from the Great Recession, employment levels and household incomes.

Do Newt Gingrich or Paul Ryan have a different interpretation of that research? Do they think the CBO ignored variables they should have included in their analysis? Who knows?

[2] Here is an example of how the CBO discussed another of the enduring myths peddled by managed care proponents (as well as advocates of vouchers, health savings accounts, and of “price transparency”), namely, the myth that risk-adjustment is both accurate and inexpensive. “Mechanisms to adjust for risk selection in an accurate and unbiased way are essential but not yet available,” stated the CBO in one of several reports to Congress on how it would score managed care fads. “Those under development would not work unless applied to large groups of insured individuals. Even then, they could be expected, at best, to adjust partially and imperfectly for the effects of selection on costs and to do so in a way that improved fairness among providers only on average and over time. Thus, some organizations that enrolled a disproportionate number of high-cost individuals might experience poor financial outcomes for essentially random reasons. In short, where risk adjustment is concerned, it is unclear how good is ‘good enough’ and whether adjustments that are good enough could be achieved in the near term.”(Managed Competition and Its Potential to Reduce Health Spending, CBO, May 1993, p. 25).

Although accurate risk-adjustment that does not cost a king’s ransom is essential to managed care solutions, it is extremely rare to find a matter-of-fact, honest assessment like this in managed care manifestos and in peer-reviewed analyses of managed care proposals.

[3] Trump’s claim that he would replace Obamacare with something “terrific” inexplicably influenced the views of some voters. But Republican hype about Obamacare and their own “repeal and replace” plans was a secondary factor. The public saw with their own eyes the contrast between the Democrats’ hype about the ACA and its actual performance. They will also see the gap between Republican hype about “repeal and replace” legislation and its actual performance.

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8 Comments on "Democrats Paid a Steep Price For Ignoring the CBO. Republicans Will Too."

Jeff Goldsmith
Mar 22, 2017

Kip, yet another wonderful post. Politicians and their urgent promises come and go. Perhaps it is asking too much of them to tolerate a scientific approach to policy where forecasts, inherently fragile and vulnerable to assumptions, are at least based on what we do know, and our degree of confidence in the assumptions.

I had my own quibbles in this space about CBO’s past forecasts about selection effects in the Exchanges (Dec 2009). They have not done an awesome job forecasting policy effects on our now more than trillion dollar private insurance risk pool. The CBO missed the surge in individual and small group rates that damaged the Exchange and small group marketplace because it believed that the new enrollees would be less expensive and less costly to take care of than those already in the market. Not death spiral material, to be certain, but the cause of a lot of the Obamacare backlash.

But CBO’s analyses are always an excellent starting point for an intelligent conversation about what to do. And we have had a string of excellent CBO heads, notably Reischauer, Orszag, Elmendorf and Holtz-Eakin, all of whom took healthcare issues seriously. It is an institution worth protecting.

Mar 21, 2017

Being a CBO fan of sorts (mostly a data guy) I think you mostly get this right. As I recall, I don’t think it was so much that the CBO correctly predicted the lack of effectiveness of the ACA cost cutting attempts, but rather that they refused to make estimates for most of them since there was no evidence to suggest they would work. Also, I don’t remember anyone suggesting that CBO be eliminated during the attempt to pass the Clinton bill or when the ACA was passed. To be fair to the GOP, I think the suggestion to eliminate it has mostly come from right wing media and Gingrich. I am not sure how serious this is, but given that they eliminated the OTA, I guess we can’t ignore it.


Mar 21, 2017

Thanks for the reminders Kip, Einstein said “We can not solve our problems with the same level of thinking that created them.” It is time to find a moral center to the American problem of health care for all of us.

Mar 21, 2017

I mostly agree – except for this:
“Today Republicans are doing exactly what Democrats did eight years ago – they’re whining rather than telling the public what it is about the CBO’s methodology they disagree with.”

IIRC, eight years ago, Democrats complained about the CBO methodology for scoring some specific proposals … but ultimately accepted them & shaped the legislation around them & didn’t ask members to vote without having a CBO score of the bill they were voting on. What Republicans are doing is entirely different – they’re not just complaining or challenging the CBO methodology, they’re bypassing the whole scoring process (having first made the budget committee vote on the first version of the AHCA without a score, and now bound to make the whole congress vote on an amended version of it without a score).

I also think it’s outrageous & novel that the GOP leaders aren’t just critiquing CBO’s assumptions about the impact of specific changes, they’re faulting CBO for not scoring provisions that aren’t actually in the bill (that’s the argument that CBO’s score is invalid because it doesn’t reflect the “three-step approach”). This is either lunacy or intellectual dishonesty.

Basically, i think the handful of people like Mr. Sullivan who care about whether the law actually works or not should be coming down hard & loudly on the Republicans at this point, whether they support the ACA or favor some sort of repeal & replace. The crap that the GOP leadership are trying to get away with right now won’t get noticed otherwise.

Mar 21, 2017

Parkinson’s Law continues to control the cost of our nation’s healthcare.