Health Care Reform: A Budget Bargain?

I pity the poor folks at the Congressional Budget Office. They are constantly being thrown into politically sensitive situations, and then expected to retain impartiality. From what I know of them they try very hard to maintain their non-partisan status. So their involvement in the health care reform debate must be testing their neutrality to the limit.

The CBO analysis of the latest health care reform proposal – the one being voted on this weekend – was eagerly awaited because it represented a last gasp for both sides to rally their respective troops. So when it weighed in with a result that suggests reform will reduce the budget by around $138 billion in the next ten years, the sigh of relief on the left was palpable, and the torrent of derisive scorn on the right ratcheted up even more.

Read it yourself on their website.

Any forecast over a period of ten years is simply a guideline rather than an accurate portrayal of actual outcomes, so it best to round all these numbers off to the nearest few billion. Nonetheless the reform does deliver on its stated goal of reducing spending on health care. There is no way around that fact. To this extent the reform as it stands is a triumph for Obama – he always approached health care as a budget problem as well as a moral/social problem, and he delivers.

The CBO analysis shows that the cost of the various proposals is about $794 billion over ten years, a figure that includes a tax on the so-called ‘cadillac plans’ so abhorrent to the unions. But this huge cost expansion is more than offset by cost cutting elsewhere.

The cost savings are so detailed and widespread that they include the reduced cost of Postal Office usage because of the increased use of internet and office technologies. They also take into account the impact of the reform on the Social Security Trust Fund. But the major cost reductions – over half the total – come from the modifications being proposed to Medicare to make that program more viable and cost effective.

Overall these cost reductions weigh in at a hefty $913 billion over the same ten years.

You will notice that $913 billion less $794 billion is not $130+ billion. It is only $119 billion. The difference is made up from smaller incremental savings that are found in attached legislation also part of the total reform package going through reconciliation. Confusingly the CBO report keeps all this analysis separate, one result of its meticulous attempt to be neutral, but it makes for heavy lifting to sort out the total impact.

So, according to the CBO’s cover letter attached to the analysis the total impact is around a $138 billion savings over the period 2010 through 2019.

A further major feature of the analysis is the calculation of the number of extra people who would now be covered. That figure is now 32 million, up slightly from earlier versions of the legislation. A different way of looking at the reform’s impact is to look at the huge drop in the uninsured: that figure declines dramatically after 2014 from around 50 million to around 23 million, meaning that the total percentage of the population then covered would rise to 92% – or 95% if we exclude illegal immigrants.

This huge extension of coverage, at a reduced cost, adds a second major component to the overall success of reform. It provides a second vindication for the passage of the proposal.

All this sea of numbers is very dull to review in this manner, but the CBO analysis is a crucial step towards reform. It provides strong neutral endorsement of the claim that reform is a budget benefit and rebuts the right wing claim that reform produces a ‘big government’ mess. The truth is that the government is made smaller by reform, which while counter-intuitive, is now borne out by the numbers.

Naturally nothing is resolved by the CBO report. The back room politicking still has to roll on until the actual vote and the opposition will raise its voice even more vituperatively as its defeat looms larger. But from my perspective the report simplifies things a great deal. If our starting point is the fiscally unsustainable nature of our current system, which I think is the best place to begin any discussion of health care reform, then we should greet the CBO figures as a welcome and positive moment in our thinking. Clearly the proposal rises to the challenge of fiscal responsibility. For me, that clinches the deal.

I doubt, however, that it will assuage the more extreme opponents of reform, but it should be enough to push a few wavering middle of the road votes in Congress into the ‘yes’ column.

Reform is looking more and more likely.

About time.