25 July 2009

CBO Expanding Its Analysis

The CBO Directors' Blog states:
'In this year’s discussion of health reform, many people have put forth the goals of “bending the curve” of the federal budgetary commitment to health care, the federal budget deficit, or overall national health expenditures. Accordingly, Members of Congress are asking CBO to analyze the extent to which different health reform proposals meet these goals. Last month we wrote to Senator Conrad and Senator Gregg: “CBO does not provide formal cost estimates beyond the 10-year budget window because the uncertainties are simply too great. However, in evaluating proposals to reform health care, the agency will endeavor to offer a qualitative indication of whether they would be more likely to increase or decrease the budget deficit over the long term.” ... We are very reluctant to extend these extrapolations further into the future, because the uncertainties surrounding them magnify considerably. Although we publish projections of the federal budget 75 years ahead, those projections are inherently uncertain and are designed to identify broad trends rather than to reflect specific pieces of legislation. Trying to project several decades ahead not just the evolution of the health care system under current law but also the effects on that system of a particular comprehensive and interacting set of reforms is extremely difficult. One particular challenge is that our long-term projections under current law incorporate changes that we expect would be made by state governments and the private sector in response to the growing burden of health care spending (responses which could occur under current federal law). Because that burden will mount over time, the responses will likely increase in intensity as well; as a result, determining whether reforms proposed in current legislation might ultimately have occurred through the actions of these other agents becomes increasingly complicated as the time horizon lengthens. Indeed, our Panel of Health Advisers has encouraged us to focus on estimating the effects of legislation during the next couple of decades and not to attempt to estimate effects further out.'
I can't help noticing two items. 1. It appears that Congress is putting some pressure on CBO to project past the point where statistical analysis can comfortably take them. Hence, CBO will attempt a qualitative assessment, that they warn should be taken with a good dose of salt. 2. In reading the whole blog, one gets the feeling that the pressure is to make some sort of an indication that the very long-term effects of the proposed health-care reform will have a positive effect on the deficit and multi-decadal debt. It leads me to wonder if Congress may be giving up on selling the proposals as fiscally prudent in the short-term.

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