How numbers crunchers shape health reform

Sen. Olympia Snowe, R-Maine, has complained to Elmendorf that the CBO’s estimate of the money that could be saved by using comparative effectiveness methods — $1.3 billion over 10 years — is too small.

But the CBO chief told her that greater savings could be realized only if Congress decided to reward hospitals that followed cost-effectiveness standards and penalize ones that didn’t.

And he warned that the comparative effectiveness studies “are not going to say in general, ‘this whole type of medicine is completely worthless’ or ‘this whole type is completely useful.’” The assessment is going to be “much more nuanced than that.”

And the more nuanced the assessment is, the less likely that CBO can specify how much money would be saved.

Orszag acknowledged the difficulty, saying “the game changers,” such as comparative effectiveness research, are “very difficult to quantify.”

There’s another problem with the CBO numbers: the time horizon.

Savings, perhaps in 15 years
Congress directs CBO to use a 10-year window for its cost estimates. But Elmendorf warned that many cost-saving steps “might not yield substantial budget savings or reductions in national health spending within a 10-year window.”

For instance, he said, Medicare could cut payments to hospitals with high rates of re-admissions caused by medical errors, but it would first have to gather data about re-admission rates and notify hospitals. That would likely mean that the full benefit of the change would not be apparent within the 10-year-period, he said.

But despite the difficulty that analysts have in putting a precise number to the savings to be obtained from some policy changes, members of Congress continue to cajole the CBO into producing estimates that would help sell health care reform to the public.

The reason for that is simple: The bigger the CBO's projected cost savings, the smaller the tax increases needed for the bill to be deficit neutral.

The CBO’s leaders “try their darnedest to try to make sure they protect the estimators from any political interference,” said Eugene Steuerle, a former Treasury Department official who is now vice president of the Peter G. Peterson Foundation.

But he added, “In many cases the information available to the estimator is quite minimal. The estimator may still have to provide a number, even though they may very minimal information by which to do it.”

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