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HELP! IS THE CBO GETTING SUCKERED?

In a comment on my previous post on
the Senate Health, Education, Labor, and Pensions reform bill, tcoyote
explained some of the political thinking behind what seem like totally
spurious cost projections. While I can readily accept tcoyote’s explanation
of the pols’ efforts to ignore reality, I’m still politically innocent
enough to want to know what the HELP bill might really cost. So I spent
some time looking at the Congressional Budget Office report on the bill. 

Here are a few things I noticed: 

  1. The “ten-year projection”
    starts in 2010, although the bill does not require insurance exchanges
    to be implemented until 2014. The result is that the projection includes
    only six years of reform (plus a lengthy transition period), NOT ten
    years.
  1.  The CBO projections
    include a $58 billion “credit” for the impact of the HELP bill’s
    proposed new long-term care program (the so-called CLASS Act). However,
    the “credit” accounts for the difference between premiums and benefits
    over the 2010-2019 period on a cash basis only. If conventional accrual
    accounting were used, CLASS would show a net cost for the period.

  1. The number of individuals
    eligible for the proposed Medicaid expansion is projected to be 26 million,
    not the 20 million implied by Senator Dodd in his news conference on
    behalf of the HELP Committee.>
  1. The CBO estimates include
    no allowance for medical inflation, except in terms of increased subsidies
    for lower-income exchange participants.
  1. The CBO assumption that
    the absurdly low levy for play-or-pay “payers” will not cause any
    significant migration from employer sponsorship to the exchanges seems
    wildly unrealistic (as I’ve already commented).

The bottom line is that a realistic
ten-year projection of the costs of the fully-implemented HELP bill
plus Medicaid expansion would be somewhere between one and a half trillion
and two trillion dollars. (And still with eight million or more uninsured). 

It’s disappointing to see the CBO
apparently getting suckered into putting a favorable slant on the numbers
(Senator Dodd noted that he’d put a lot of pressure on CBO Director
Doug Elmendorf). Hopefully, CBO’s subsequent scoring of the HELP Committee’s
efforts (along with Senate Finance’s Medicaid expansion) will provide
a more realistic picture. 

Meanwhile, how about looking at ways
to control costs other than the public plan (which as envisioned by
the HELP bill will depend on the willingness of providers to participate,
at government-set payment rates, potentially creating another version
of Medicaid)?

Roger Collier was formerly
CEO of a national health care consulting firm. His experience includes
the design and implementation of innovative health care programs for
HMOs, health insurers, and state and federal agencies.
He is editor of
Health
Care REFORM UPDATE

[reformupdate.blogspot.com].

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GeorgeJim BertschDeron S.Margalit Gur-Ariepropensity Recent comment authors
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George
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George

Roger, you are quite on track with comment #2. See the non-partisan analysis in the following link:
http://www.actuary.org/pdf/health/class_july09.pdf

Deron S.
Guest

tcoyote – Thanks for the reality check. They say if you lower your expectations, you have less chance of being disappointed. I have to keep telling myself that.

Jim Bertsch
Guest
Jim Bertsch

The CBO when counting widgets can truss up the numbers nice and tightly and conveniently ignore reality. The solution to reforming health care is simple and far reaching — transform the payment system. Until we have fee-for-service and pay-per-pill payment reform, there will be no reform just repackaging of the same old problems. All of our health care problems stem from the fact that the health care community stakeholders: health providers, pill producers and health insurers all generate their salaries, bonuses and profits from their sick customers. In its essence the health care market grows when the population is perceived… Read more »

tcoyote
Guest
tcoyote

“Consumer responsibility” is a Reagan/Gingrich construct. This is about rescuing the Republic and its helpless citizens (one third of whom are obese), not about getting us to change our behavior. Get with the program, dude.

Deron S.
Guest

It continues to amaze me how much some people are prepared to spend without even addressing the reasons the system is so expensive in the first place. Bob Laszewski’s Affordability Model, while it has some holes, at least provides some necessary incentives for the players to change their wasteful ways.
There is no more powerful force in any market than the consumer. Why have healthcare consumers not stepped up in that role? Reform cannot be effective unless it completely addresses that question.

Margalit Gur-Arie
Guest

I can’t find the text of this “visionary” proposal anywhere, so I have a couple of questions.
Is the public plan defined as “the same plan Congress has” per the President’s campaign statements, or is this just a crappy HMO that covers next to nothing?
For the employers that decide to play, is there a minimum plan that they have to offer (I would expect the same Congress plan), or can they just offer something that would cost them less than the miserable proposed fine, and provide an illusion of coverage?

propensity
Guest
propensity

The CBO is not alone in having been suckered. The Congress of the United States joins the CBO, having been “educated” by HIT lobbyists as to the erroneous financial (and safety) benefits of the HIT system for which more than $20 Billion was appropriated.

tcoyote
Guest
tcoyote

Elmendorf will have mighty rubbery elbows by the time this is over. . .
This seems like reasonable analysis.
Don’t see how the big states (New York, California, Florida, Illinois, Pennsylvania) are going to have the fiscal capacity for their end of this deal even in three or four years. How’d you like to be a Democratic governor just now. At some point, you have to say something.
Keep after ’em, Roger.