WASHINGTON — A congressional budget agency little known outside Washington once again has demonstrated the power of number-crunchers to drive policy.
The economists who populate the Congressional Budget Office estimated this week that a Senate committee's version of President Barack Obama's health overhaul plan would cost a cool $1 trillion but still leave millions of Americans uninsured.
Although Democrats said the CBO analysis was preliminary, based on incomplete details of the legislation, the damage was done: Republicans pounced on the findings.
It might seem that history is repeating itself, given that a critical CBO analysis dealt a huge setback in 1994 to former President Bill Clinton's efforts to overhaul health care. Senate Democrats are scrambling to rework the legislation, and they said earlier this week that they'd get it right — with a more favorable CBO report — even if it pushed their timeline for completing a draft to early July.
Since Congress created the CBO in 1974 as the ultimate arbiter of the impact of spending on the budget and deficit, the agency has had an inherent tension with the White House and the majority party in Congress over the cost and impact of huge new programs. Those disputes have ranged from the financial implications of the Bush administration's Medicare prescription-drug program to the cost of the wars in Iraq and Afghanistan to the star-crossed Clinton health care proposal.
Congress "and interest groups and the administration want the program expansions to impose as little additional cost as possible, and the provisions that generate savings to produce as much as possible," said Robert D. Reischauer, the president of the Urban Institute and a former director of the CBO. "The members of Congress and the administration get lots of information from advocates arguing that CBO is being too parsimonious" in the way it assesses a program's costs or impact.
Reischauer ran afoul of the Clinton White House in 1994 when the CBO, in evaluating a plan for creating insurance markets or exchanges to provide government-sponsored coverage to Americans, ruled that the premiums flowing into the exchanges and the payments going out were governmental in nature and therefore had to be reflected in the overall cost of the program. This decision had the effect of adding billions to the long-term cost of the program, a finding that its many opponents eagerly seized on.
"I characterized that as something of a rounding error," Reischauer recalled. "But those who wanted to make hay did, just as you're seeing now."
Douglas W. Elmendorf, a veteran government economist and scholar with a Harvard Ph.D. who served in the Clinton administration during the health care debate, became the eighth director of the CBO in January. He took over from Peter Orszag, who'd moved to the White House to become Obama's budget chief.
Almost from the moment the two assumed their new posts, they began sparring over health care, specifically over the effectiveness of Obama's initiatives to drive down costs long term and not add to the budget deficit, while extending insurance to many of the approximately 46 million uninsured Americans.
In a May 29 Office of Management and Budget blog, Orszag acknowledged that expanding coverage would temporarily dominate and drive up spending, but that the cumulative effect over time would be "a reduction — and perhaps a dramatic one — in government spending." Elmendorf cautioned in a subsequent CBO blog, however, that many of the administration's hoped-for savings would "materialize slowly over time" and that some initiatives, such as prevention efforts or disease management, might drive up costs.
The CBO analysis that's driving debate on Capitol Hill arose from a legislative timetable that the Democrats now might be regretting. As part of his strategy, Obama offered broad outlines for his program but left it to Congress to work out the details and draft the legislation, avoiding a repeat of the mistake Clinton made in trying to dictate the bill.
House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., put the legislation on a fast track, with major committees with jurisdiction in both chambers responsible for drafting and reconciling a massive plan. In the Senate, the Health, Education, Labor and Pensions Committee and the Finance Committee have leading roles in drafting bills that will have to be merged at some point.
When the Health Committee decided to go first with its legislation, it was required to submit the proposal to the CBO for review, but the draft was missing important elements that could affect the agency's conclusions.
The committee had assumed an expansion in Medicaid coverage, but it wasn't in the bill because that's under Finance's jurisdiction. The CBO assumed there'd be a requirement for individuals to acquire health insurance, but the penalty in the draft for failing to buy insurance was weak, only $100. A much tougher enforcement mechanism definitely would have increased coverage. Also, the Health Committee exempted people who earned less than 150 percent of the poverty level from any penalty.
Further, there was no mention in the bill of the so-called "pay-or-play" provision to pressure employers either to provide insurance or contribute to a pool, so that wasn't reflected in the CBO estimate. Finally, there was no mention of Obama's proposal to create a public entity to provide reasonably priced coverage to the uninsured.
Elmendorf wrote that if the Health Committee's bill were fully implemented, about 39 million people would obtain coverage through the new insurance exchanges. The number of people with employer-sponsored coverage would decline by about 15 million, however, and "coverage from other sources would fall by about 8 million," resulting in a net decrease in the uninsured population of about 16 million.
White House officials said this week that it was important to focus on the bigger picture of enacting a deficit-neutral program for expanding coverage to millions of Americans and to drive down unsustainable health care costs.
"I think that most people who follow this closely understand that this was an analysis of a very incomplete draft from one committee, that there are a lot of different proposals that eventually will have to be put into one," said Kenneth Baer, a spokesman for Orszag. "I wouldn't say that we're concerned."
Some Republicans, including Sen. Michael Enzi of Wyoming, a member of the Health and Finance committees, voiced outrage that the Democrats were pushing a trillion-dollar plan that they charge promises relatively little in return.
Sen. John Cornyn, R-Texas, a member of the Finance and Budget committees, said the CBO analysis highlighted a larger problem with Obama's health care policies. The White House, he charged, is attempting to obscure the problem with health care "buzzwords."
"I think the schedule is going to slide because of the shocking numbers coming out of the Congressional Budget Office," Cornyn said.
Other experts — and Senate Democrats — downplayed the significance of the CBO assessment. Ken Thorpe, the chairman of the health policy and management department at Emory University and a former Clinton administration official, said it would be unwise to make too much of the initial $1 trillion price tag because "it's just the first of many."
(Kaiser Health News staff members Jenny Gold and Kate Steadman contributed to this article.)
(Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization that's not affiliated with Kaiser Permanente.)
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