Will The CBO Score MedPAC Reform?

Ruth Marcus has a column joining the Obama administration in touting MedPAC reform, specifically altering the default rule regarding congressional involvement with MedPAC’s Medicare payment recommendations, as a good way to produce efficiencies in health care reform. I am also enthusiastic about this idea but it is important to note one wrinkle here. One thing that’s important in the health care debate is actually saving money over the long run. Another thing that’s not important but does carry a lot of political significance is fitting costs into the ten-year Congressional Budget Office scoring window.

Some things that reduce the CBO-scored cost, don’t actually generate any efficiency. Delaying implementation of your program, for example, makes it “look cheaper” to the CBO’s rule-based approach simply by exploiting the rules. But by the same token, some things that really would save money won’t necessarily be scored as saving money. And I worry about this with regard to MedPAC. The CBO can say easily enough that if such-and-such recommendations were adopted, that would save money. And it’s common sense to say that if you depoliticized the decision-making, certain expert recommendations that would be rejected under the current system would instead be adopted. But it’s not totally obvious to me how CBO analysts are supposed to score that. And when faced with uncertainty, the CBO tends to score very conservatively. As Jon Cohn explains:

The CBO, again, makes projections based on fairly conservative assumptions about the impact of efficiency changes to health care. In effect, it assumes the worst. As far it’s concerned, there are really only a handful of ways to substantially reduce costs–that is, to bend the cost curve down–over the long run. You can cap or eliminate the tax exclusion, which CBO believes will drastically alter incentives and put downward pressure on costs. You can create sort of automatic budget mechanism that reduces spending levels if savings don’t materialize over time. (The 1993-94 Clinton health care plan had something like this.) You can also take payment policy out of the hands of Congress and put it in the hands of an independent authority.

(Actually, CBO has only hinted that the last suggestion will work. We’ll learn more soon, if indeed Congress adopts a proposal along those lines that the administration and Senator Rockefeller are circulating.)

That parenthesis is important, since the MedPAC reform appears to be the main cost-cutting measure the administration is pushing on the Hill. And I think it’s a smart idea. But members of congress generally care much more about CBO scores than about reality. So if the CBO comes back and says “there’s a case to be made that this will save a ton of money but it’s hard to say for sure so we’re only going to predict very modest savings” then this could be a lot of work for little political payoff. By contrast, the CBO keeps indicating that it will score exclusion-curbing pretty aggressively which I think counts as a good reason to put some version of this back on the table.