Scored Earth

by digby

One more example of the folly of allowing the deficit hawks to define the parameters of the debate:

On Saturday, the Congressional Budget Office said the proposal to give an independent panel the power to keep Medicare spending in check would only save about $2 billion over 10 years- a drop in the bucket compared to the bill’s $1 trillion price tag.

“In CBO’s judgment, the probability is high that no savings would be realized … but there is also a chance that substantial savings might be realized. Looking beyond the 10-year budget window, CBO expects that this proposal would generate larger but still modest savings on the same probabilistic basis,” CBO Director Douglas Elmendorf wrote in a letter to House Majority Leader Steny Hoyer on Saturday.

I have to blame the Democrats for this. They spent the last 25 years bowing and scraping to the Republicans over balanced budgets like a bunch of 50s era housewives answering to a domineering husband (and then stood by idly as their husbands blew the family savings on gambling and hookers.) They are also to blame for failing to properly explain that the “savings” from health care reform was going to be seen in the system as a whole, not necessarily the government portion of it, which would likely be realized later. It’s complicated, but at the very least they should not have paid obeisance to all these fiscal scolds and deficit hawks the way they did. It’s a little self-defeating when you are proposing a new program that was always going to cost money in the early years. I don’t know how they ever hoped to finesse this.

Having said that, there are reasons to be skeptical of the CBO’s assessment.

The administration is a strong proponent of these reforms, but the challenge lies in pleasing the CBO — which finds savings by following Potter Stewart rule life: “I know it when I see it.” However, since the MedPAC-like proposal is predicated on the President accepting its recommendations and Congress not voting them down, (and MedPAC is only required to not “increase in the aggregate level of net expenditures under the Medicare program,”) the CBO — which rarely defines the criteria of savings — is unlikely to “see” savings.

The Bush administration basically told the CBO to take a hike when it came out with numbers they didn’t like. If this were the area where Obama decided to follow in its footsteps instead of indefinite detention and state secrets, we’d all be better off.

Obviously the deficit is a concern. But it’s a far greater concern to bond traders and other masters of the universe than it is to average citizens. The savings realized over the years by the reforms put in place today, plus higher taxes (which are not, contrary to popular myth, a sign of Armageddon) and lower premiums and out of pocket costs, would allow the US to convert to a system that delivers the kind of health care at the kind of cost that other industrialized nations have. Which is to say a much better system for less money overall.

But Pete Peterson doesn’t want that and he and his friends have created a sacred shibboleth of the term “deficit” which is used to elicit the same kind of fearful pavlovian response as the word “terrorism.” And as with terrorism, all the Republicans have to do is breathe the word and the Democrats start sputtering and running for cover.

The Big Money Boyz (who, contrary to certain cheap shot artists’ little gibes, I have been on to for oh, a few decades now) geared up their deficit talk as the Bush administration came to an end and they are now back to working comfortably in tandem with the conservative movement (which they own outright as opposed to the Democratic Party in which they only hold a controlling interest) to destroy even the slightest movement toward health care reform. The village, like a bunch of squealing little pigs in a puddle of mud are happy to help them by being willfully obtuse about the whole thing.

The sad truth is that the Democratic majority still rests on conservative propaganda and until somebody seriously challenges their ideology, we are going to be battling these fiscal phantoms. As dday elegantly put it the other day, America is worth paying for . Maybe somebody ought to start asking these so-called patriots why they don’t agree with that.

Update: White House responds:

Peter R. Orszag, Director

This morning, the Congressional Budget Office (CBO) analyzed proposals to shift more decision-making out of politics and toward a body like the Independent Medicare Advisory Council (IMAC) put forward by the Administration. CBO noted that this type of approach could lead to significant long-term savings in federal spending on health care and that the available evidence implies that a substantial share of spending on health care contributes little, if anything, to the overall health of the nation. This supports what President Obama has said all along: we can reduce waste and unnecessary spending without reducing quality of care and benefits.

In part because legislation under consideration already includes substantial savings in Medicare over the next decade, CBO found modest additional medium-term savings from this proposal — $2 billion over 10 years. The point of the proposal, however, was never to generate savings over the next decade. (Indeed, under the Administration’s approach, the IMAC system would not even begin to make recommendations until 2015.) Instead, the goal is to provide a mechanism for improving quality of care for beneficiaries and reducing costs over the long term. In other words, in the terminology of our belt-and-suspenders approach to a fiscally responsible health reform, the IMAC is a game changer not a scoreable offset.

With regard to the long-term impact, CBO suggested that the proposal, with several specific tweaks that would strengthen its operations, could generate significant savings. (The potential modifications included items such as providing mandatory funding for the council, rather than having the council rely on the annual appropriations cycle, and requiring independent verification of the expected reductions in program spending rather than relying only on the Medicare actuaries for such verification, along with other suggestions, such as including an across-the-board reduction in payments as a fallback mechanism if the council did not produce proposals that generated adequate savings.) And if you look back at recent history, one can see why an empowered advisory council would be useful. For example, for the better part of this decade, MedPAC has recommended reducing overpayments to insurance companies for Medicare Advantage plans – to equate those payments with the cost of covering the same beneficiary under traditional Medicare. Yet, nothing happened, costing taxpayers tens of billions of dollars. We can’t afford that type of inertia.

The bottom line is that it is very rare for CBO to conclude that a specific legislative proposal would generate significant long-term savings so it is noteworthy that, with some modifications, CBO reached such a conclusion with regard to the IMAC concept.

A final note is worth underscoring. As a former CBO director, I can attest that CBO is sometimes accused of a bias toward exaggerating costs and underestimating savings. Unfortunately, parts of today’s analysis from CBO could feed that perception. For example, and without specifying precisely how the various modifications would work, CBO somehow concluded that the council could “eventually achieve annual savings equal to several percent of Medicare spending…[which] would amount to tens of billions of dollars per year after 2019.” Such savings are welcome (and rare!), but it is also the case that (for good reason) CBO has restricted itself to qualitative, not quantitative, analyses of long-term effects from legislative proposals. In providing a quantitative estimate of long-term effects without any analytical basis for doing so, CBO seems to have overstepped.

They can’t ignore these headlines coming from places like Politico and try to just spin it out with verbiage. The Village doesn’t care about the details, they care about Chuck Todd’s “political reality” and they are getting very excited over the prospect of Obama’s Waterloo. The White House is going to have to fight that up front.

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