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Bold Medicare Reform May Require Going Beyond the CBO Score Bold Medicare Reform May Require Going Beyond the CBO Score

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Bold Medicare Reform May Require Going Beyond the CBO Score


Congressional Budget Office (CBO) Director Douglas Elmendorf (left) shakes hands with Sen. Max Baucus, D-Mont., chairman of the Senate Finance Committee, at the end of a public hearing in Washington, Wednesday, Oct. 26, 2011.  (AP Photo/J. Scott Applewhite)

Liberal Democrats would rather not see any cuts to entitlement programs — period. Instead, they argue, the U.S. government needs to put policies in place that will bring down the costs of health care overall. Make care cheaper to administer, the argument goes, and Medicare and Medicaid won’t cost the federal government so much.

It’s a beguiling idea with one big flaw: The Congressional Budget Office isn’t always able to put a dollar figure on how much money Democrats’ ideas would save. As Washington negotiators work toward a debt-reduction deal, Democrats want reducing the cost of care to be part of the conversation. But budget negotiators want to be able to talk in dollars.


CBO’s scoring rules “much too much embed the status quo. They require levels of certainty about the costs and benefits that defy many forms of innovation,” said Donald Berwick, a Center for American Progress senior fellow and former administrator of the Centers for Medicare and Medicaid Services.

“They don’t invite the kind of ambitious thinking that the country really needs right now, and unfortunately it does increase the risk of cuts,” he said.

The Center for American Progress — known as something of a brain trust for President Obama’s White House — put out a report last week itemizing $385 billion in Medicare savings over ten years. The bulk of the savings came from lowering payments to providers, particularly drug companies and hospitals.


Yet CAP President Neera Tanden pitched the report as a way to “to use Medicare as leverage, but to transform the health care system to lower health care costs.” The report also included a number of ideas that the authors believed would slow the rate of health care costs across the system as a whole. 

Just taking money out of Medicare isn’t enough, Tanden and senior fellow Ezekiel Emanuel told reporters at a breakfast last week. But “the, I would say, unfortunate fact is that’s what CBO will score,” Emanuel said. Immediate cuts were how the center got to $385 billion, he said, but the real meat of their proposal lies in programs “that we score very low or at zero.”

CAP’s unscored proposals included some familiar ideas: allowing states to set targets for overall health care spending, improving coordination of care for low-income seniors and improving price transparency.

“We went through this with the Affordable Care Act,” Tanden said. Because sufficient empirical evidence of cost-savings isn’t available, the Democrats’ big-picture proposals have to be tucked in amid others tied to specific savings.


Both Republicans and Democrats complain that CBO’s scoring rules hamper their ability to put forward a visionary proposal for entitlement reform. CBO is hesitant to score proposals over a period longer than 10 years. It bases its estimates on current data and current law. And as the office acknowledged during the health care reform debate, it’s difficult to say with certainty how policies that transform the health care system will affect the federal budget over the long term.

It’s a whole lot easier to score a short-term change that doesn’t really depart from the status quo. Hence the tweaks that are usually discussed when Washington talks about entitlements, said Thomas P. Miller, resident fellow at the American Enterprise Institute. Shrinking the number of seniors eligible for benefits, cutting payments to providers, or making wealthy seniors pay a more are some familiar ideas.

“They’ve been scored and authorized in the menu book by CBO,” Miller said of the usual list of fixes. More substantial reforms “don’t show up as chips that you could put on the table,” he said.

“The bigger thing that’s going on is that this stuff is really complicated,” said David Auerbach, a policy researcher at Rand and a former CBO policy analyst. These days, CBO deals with a multitude of models, including estimates of how a law will affect consumer or business behavior.

But some Democratic arguments — like the notion that an expansion of health care coverage will lead to a healthier, more productive workforce — don’t factor into CBO’s estimates, Auerbach said. There just isn’t enough empirical evidence behind that claim.

In fact, there’s little evidence that previous Medicare payment experiments cut costs. Only one out of four value-based payment demonstrations within Medicare has saved the federal government money, a January CBO study found. And that demonstration, which bundled payments for heart surgeries, didn’t see any improvement in patient outcomes.

The 2010 health care law included funding for pilot projects aimed at reducing the cost of care, but as yet, it’s unclear whether the projects authorized by CMS are saving money. “It is, I think, overall too early to tell,” Berwick said. But, he argued, that doesn’t mean the government should stop trying to find a better way to deliver care.

Lack of evidence may not dampen Democratic enthusiasm for moving away from a fee-for-service health care system, but it sure doesn’t convince Republicans that Democratic proposals are anything more than magical thinking.

Limits to CBO’s imagination cut both ways. Republicans often complain that the CBO won't calculate any savings that might come from the competition between health plans. That call, they argue, inflates CBO cost estimates for the plan from House Budget Chairman Paul Ryan, R-Wis., to turn Medicare into a premium-support system.

The CBO’s scoring process may not encourage creativity, but that doesn’t mean lawmakers should resign themselves to an unsustainable status quo, Miller said. “I think they hide behind it,” he said of lawmakers and CBO’s scoring rules. Sometimes, the only way to find out if a plan saves money may be to go ahead and implement it, Miller suggested.

A deficit-reduction framework, or a deal to avert the so-called fiscal cliff, will likely choose from the same old menu of cuts and savings within entitlement programs. But unless there’s a bold move away from the status quo, as both parties know, Medicare is going to go bankrupt.

Margot Sanger-Katz contributed contributed to this article.

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