Saturday, March 27, 2010

CBO Scoring of the Healthcare Bill

To Dr. Paul Krugman in response to your comment about Douglas Holtz-Eakin’s op-ed:
If this is the best critique a conservative budget wonk can come up with – if deliberately misrepresenting how the legislation works is the only way to make it seem irresponsible – then the bill must be pretty sound in fiscal terms.
Please address the following:

Keith Hhennessey has concerns about the assumptions the CBO scoring is based on:

"If these bills become law, we are left with two problems. The assumed conditions may not hold, so this new promise may in fact be underfunded just like all prior promises. And even if the conditions hold, we still have left unsolved the long-term fiscal problem with which we began, and we have fewer tools available to fix it.

The assumed conditions will not hold because they are not designed to hold. The bills' authors have cleverly constructed the promises so that they are paid for in an accounting sense, but are politically unsustainable. New Medicare spending on doctors is paid for, as long as you believe Congress will allow even bigger cuts to take effect two years from now. The new insurance subsidies are paid for, as long as you believe that a tax increase scheduled to begin far in the future will survive eight years of labor union lobbying for repeal or perpetual delay. The new insurance subsidies are designed to cover those who buy health insurance outside of employment, but not those with the same salary who get health insurance through their job. If you believe this inequity is politically sustainable, then the bill is paid for. If instead you think there will be unbearable political pressure to provide equal treatment and expand subsidies to some of the 100+ million Americans who today get their health insurance through their job, then the subsidies you enact now are only the camel's nose under the tent, and you are setting us on a path to an even larger and unfunded government promise. "

Greg Mankiw also noted concerns about conventions of budget scoring and
the credibility of assumptions used

"When they estimate the budget impact of a bill like this, they assume the path of GDP is unchanged.... It is not because the CBO staffers necessarily believe that result. Rather, it is just one of the conventions of budget scoring heir estimates should come with a warning label:
'These numbers are based on assumptions that are convenient but not credible. Use at your own risk.' "
He also highlighted quotes sourced from a letter sent to Nancy Pelosi from the Congressional Budget Office about its own numbers concerning the healthcare bill providing caveats about the limits of their analysis:
"The reconciliation proposal and H.R. 3590 would maintain and put into effect a number of policies that might be difficult to sustain over a long period of time.

... The projected longer-term savings for the legislation also reflect an assumption that the Independent Payment Advisory Board established by H.R. 3590 would be fairly effective in reducing costs...

...It is unclear whether such a reduction in the growth rate of spending could be achieved, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care."
Do you have any thoughts on the concerns raised about the assumptions used to score the bill?

Scott Sumner has more detailed questions for Paul Krugman.


Ten Mile Island said...

It would be fascinating to watch a conversation between Messrs.Hennesey and Krugman.

Not holding my breath, though.

Eric Morey said...

It would be, Ten Mile Island. I'm not holding my breath either. At least Krugman and Mankiw occasionally respond to each other publicly.

Creative Commons License
Glodime Weblog authored by Eric Morey is licensed under the Creative Commons Attribution-Share Alike 3.0 United States License.