Land of the Lost

by von

A couple commentators to my recent post on health care reform are citing a study by Melinda Beeuwkes Buntin and David Cutler at the Center for American Progress, a liberal advocacy group:  The Buntin-Cutler report is being used as push back against the CBO's claim that the current Democratic proposals are going to add to the deficit, not reduce it:  "'The curve is being raised.' [CBO Director Douglas Elmendorf's] remarks suggested that rather than averting a looming fiscal crisis, the measures could make the nation's bleak budget outlook even worse."

Supposedly, the Buntin-Cutler Report shows that the CBO's concerns are all bunk, because the Democratic bills will clearly result in two trillion dollars worth of savings.  But y'all should read the report, which I have now done, and not simply take CAP's Wonk Room at face value.  (Digby, that includes you.)  The Buntin-Cutler Report is here. 

Candidly, I'm still trying to make heads or tails of it.  That's in large part because the Buntin-Cutler Report doesn't address the actual bills under consideration.  It's an aspirational document that lays out a bunch of possible "strategies" that might be used to pay for health care reform.  This seems to be a critical flaw in using the Buntin-Cutler Report to rebut CBO Director Douglas Elmendorf's testimony:  the Buntin-Cutler Report relates to different issues.  

Also frustratring is that the Buntin-Cutler Report seldom shows its math.  Here is just one example:

Recent research documents that 20 percent of hospitalized Medicare patients are rehospitalized for the same or a related condition within 30 days, and that a majority of these rehospitalizations could have been prevented with good follow-up care. [footnote citing NE JofM article.] Those preventable hospitalizations cost approximately $12 billion per year—$12 billion that a well designed payment system would allocate between government savings and the hospitals successfully reducing readmissions. [No footnote.]

I am so totally for eliminating preventable hospitalizations via "a well designed payment system." I am completely in favor of saving $12 billion.  What's missing from this discussion -- aside from a critical missing footnote -- is how we are going to do these things.

And, then, there is this introductory passage: 

Based on a wide array of research, our best guess is that fundamental health system reform involving just three of these strategies will lead to federal savings of about $550 billion over the next decade. First, investments in health information technology and other types of health care-provider infrastructure could bring direct federal savings of $196 billion between 2010 and 2019, primarily through administrative simplification and the more productive use of time by physicians and nurses.

Second, creating insurance “exchanges,” local or national organizations designed to act as clearinghouses for health insurance policies, could foster competition and drive down administrative costs for individual and small group policies. We estimate these reduced costs could bring in additional federal revenues of $64 billion over the next 10 years.

Finally, payment system reforms based on the idea that quality care should be rewarded rather than just more and more expensive care would create incentives to improve quality and efficiency. This could save the federal government $299 billion over this period, primarily by reducing the frequency and intensity of hospitalizations.

These three sets of policies together would yield overall system savings of $1.5 trillion over the coming decade ....

(At pp. 1-2). 

How do these "tree sets of policies" yield "federal savings of about $550 billion" in the first paragraph and "overall system savings of $1.5 trillion over the coming decade" in the final paragraph?  What are the "system savings"?  How are they calculated?  Do they include the $550 billion in "federal savings", or are they in addition?* 

Worse, a lot of folks seem to be applying the $1.5 (or $2 trillion, which is the number used later) in system savings as a deficit offset.  But I don't think that can be correct:  the Buntin-Cutler Report seems careful to distinguish "federal savings" (which I assume are offsets) from "system savings".  So it appears to be a big mistake to imply that the Buntin-Cutler Report rebuts the CBO's concerns about a growing deficit.**

I'm not suggesting that the Buntin-Cutler Report isn't brilliant in its own, unique way.  But a rebuttal to CBO Director Douglas Elmendorf's testimony?  I don't see it addressing the same issue.   

*My initial read, by the bye, was perhaps that if one added all the numbers together, it equaled $1.5 trillion.  But that's not right:  first, it makes no sense whatsoever and, second, it only equals $1 trillion.  (My error is reflected in this and prior comments on this thread.)

**Perhaps the Buntin-Cutler Report is making a much more modest claim, namely, that if its policies are implemented we'll generate some level of private savings and also have $550 billion in deficit offsets at the federal level?  But isn't that worse than the projections used by CBO Director Douglas Elmendorf's testimony and the AP estimate of the cost/offsets of the plan?

Comments

[Gary Farber]

How do these "tree sets of policies" yield "federal savings of about $550 billion" [...]

Obviously, after the policies take root, the benefits branch out.

[El Cid]

By the way, this is from the CBO's Director Elmendorf's health reform cost estimates (specifically for HR3200) as released today (linked here on CBO's main page and here directly as a PDF):

According to CBO’s and JCT’s assessment, enacting H.R. 3200 would result in a net increase in the federal budget deficit of $239 billion over the 2010-2019 period.

That estimate reflects a projected 10-year cost of the bill’s insurance coverage provisions of $1,042 billion, partly offset by net spending changes that CBO estimates would save $219 billion over the same period, and by revenue provisions that JCT estimates would increase federal revenues by about $583 billion over those 10 years.

By the end of the 10-year period, in 2019, the coverage provisions would add $202 billion to the federal deficit, CBO and JCT estimate. That increase would be partially offset by net cost savings of $50 billion and additional revenues of $86 billion, resulting in a net increase in the deficit of an estimated $65 billion.

That was from p.3 of the document as submitted to Chairman Rangel.

Now, is Elmendorf saying that for the full plan, there would be a net increase in the deficit of $65 billion over the 10 year period 2010-2019?

That's what he seems to be saying.

He didn't address the question of savings to states or individuals, but I think I will assume that there will be. I think that savings to individuals and states may be substantial over that 10 year period. I just don't have any numbers to work with from the CBO on that for HR3200.

[Oyster Tea]

I feel real dumb after reading this, but if most other economically advanced countries can do twice as well with half as much, why is there any question about the need for health care reform?

I don't feel the average citizen needs to try to understand how many bazillions it will cost or how many quadzillions we can save. If everyone else does it better and cheaper, lets follow them!

[von]

Obviously, after the policies take root, the benefits branch out.

Yeah, but how? That's the problem with this article.

El Cid, the question is whether the Buntin-Cutler Report should trump the CBO's analysis. (I'll get to the CBO's updates and other estimates shortly, and hopefully next week.)

[El Cid]

El Cid, the question is whether the Buntin-Cutler Report should trump the CBO's analysis. (I'll get to the CBO's updates and other estimates shortly, and hopefully next week.)

My comment quoted the CBO's analysis, not the Buntin-Cutler report. The quote above is directly from the CBO chairman's letter to Charlie Rangel. It is not a quote from Buntin-Cutler.

So, again, I'd like to ask someone to read through the actual, written CBO analysis which is available in full PDF at the link above.

Because it looks to me like the CBO's actual analysis -- i.e., not some incompetent media quotation which cites only costs and no savings and no increased revenues, which is either sloppy, insane or outright and purposely fraudulent -- has the program costing very little over a 10 year period.

So, as quoted and linked above, does the CBO's actual analysis have HR3200 costing very little over 10 years or does it not?

[Nate]

At this point, how's this for an idea? Just nationalize the damn health insurance companies. They're making fat profits, so they should be self-financing, plus then we can just continue the coverage offered now. Then we can fire the CEOs to pay for immediate transition costs (hundreds of millions right there cite as of 2005). Then instead of having the profit go to executive bonuses, that can be used to finance insurance for the uninsured. And gradually over a period of years we can use the profits to finance the transition costs for electronic medial records, universal coverage, etc, and gradually turn the multiple beuracracies of health insurance denials into one much simpler one. Without immediately laying anybody (except executives) off, and with no need to fuss about the cost to the deficit, since these companies are currently VERY profitable. Which may go down as the abusive practices are cut out, but we'd also be operating without large chunks of the cost, and no need to bump profits up 20% each quarter to satisfy stockholders.

(I'm not entirely joking, either.)

[von]

Because it looks to me like the CBO's actual analysis -- i.e., not some incompetent media quotation which cites only costs and no savings and no increased revenues, which is either sloppy, insane or outright and purposely fraudulent -- has the program costing very little over a 10 year period.

I don't think that you are reading the CBO's analysis carefully. The CBO's letter to Charles Rangel* projects a very substantial cost of this program -- over 1 trillion over 10 years -- with potential offsets primarily in the form of revenue provisions (e.g., taxes) as well as some service cuts and projected efficiency gains. However, even with these changes, the CBO is still projecting a substantial gap ($239 billion) for HR 3200 alone.

Thus, no, it is absolutely not correct to say that "So, as quoted and linked above, does the CBO's actual analysis have HR3200 costing very little over 10 years or does it not[.]" HR3200 costs an immense amount and the current plan still does not pay for its entire cost.

[El Cid]

I don't think that you are reading the CBO's analysis carefully. The CBO's letter to Charles Rangel* projects a very substantial cost of this program -- over 1 trillion over 10 years -- with potential offsets primarily in the form of revenue provisions (e.g., taxes) as well as some service cuts and projected efficiency gains. However, even with these changes, the CBO is still projecting a substantial gap ($239 billion) for HR 3200 alone.

Thus, no, it is absolutely not correct to say that "So, as quoted and linked above, does the CBO's actual analysis have HR3200 costing very little over 10 years or does it not[.]" HR3200 costs an immense amount and the current plan still does not pay for its entire cost.

I don't know if you're being serious or simply playing literalist games.

If you want to do the latter, do so. The internets are certainly free.

The CBO did not simply estimate program costs without other offsets. If you're going to take the CBO's estimates on cost seriously you also take CBO's estimates on savings and revenues seriously.

I don't know of too many businesses that only take serious estimates of outlay on, say, advertising, while ignoring simultaneously made estimates on what that advertising is estimated to do for the businesses' revenues and profits.

Either that or don't use the CBO's estimates at all.

It's all a matter of perception, but $239 billion over 10 years for a national health program is not serious cost barrier, particularly given the scale of expenditures in the Defense Department with which I disagree.

That's ignoring any other potential estimated savings, such as to those of individuals & families or to businesses or to state & local governments.

Do what you like, but I'm not interested in silly games.