The “New Blow to Health Plan” that was delivered over the weekend by the Congressional Budget Office illustrates the unusually powerful role that the CBO plays in determining the range of possibilities for reform, but also a little-understood fact about the CBO: It's judgments are often guesses about probabilities, and they are often guessing about political, not economic, probabilities.
The CBO determined that a proposal to give more power to an independent group that recommends Medicare payment levels, similar to the existing group called MedPAC, would produce only modest budget savings ($2 billion), and further, that “the probability is high that no savings would be realized.”
How does it reach that judgment: “The estimated savings of $2 billion over the 2016–2019 period reflect CBO’s assessment of the likely scope of the proposals that the council would make and the probability that its recommendations would be implemented by the President.”
“The probability that its recommendations would be implemented” is another way of saying, “we don't really think that the President will have the guts to make big cuts in payments.” And assuming we're talking about the current president, they are essentially saying that the president who is proposing this approach doesn't really intend to use it.
That's a political judgment. It's not a crazy one. After all, no previous president has pushed through all the recommendations of MedPAC or its predecessors. That's a significant body of evidence. But then again, no previous president has pushed through health reform either. As OMB director Peter Orszag wrote on his blog, the proposal is “a game changer, not a scoreable offset." He meant that in a more technical sense, but really, in a world where the politics have changed enough that comprehensive health reform actually passes, how useful are the facts about the political world before health reform? Big things will have changed, incentives will have shifted, and whether this president or a future one has the guts to implement cost-cutting recommendations seems kind of unknowable.
But the CBO doesn't really have the option to say “We don't know” when Congress asks it for a score that depends on a political judgment. The best it can do is the kind of balance of probabilities that we have here – a high probability that the provision will have no effect (that is, the president won't act), along with “a chance that substantial savings will be realized.” Somewhere between zero and “substantial savings” falls the magical number $2 billion.
Obviously, the CBO has to make some judgments about politics – the difference between a vague congressional resolution encouraging cost-cutting and a strict plan that requires a super-majority to act to override it is considerable. But it creates a strange, circular dynamic when the CBO is introducing its guesses about the political process into the process itself, at the very same time that the process is trying to do something that it's never done before.
To take it full circle, maybe the CBO should just issue a memo that health reform won't cost any money at all, because based on past evidence, there's a very high probability that Congress and the president won't actually pass health reform.
-- Mark Schmitt