Oct 20 2009
The senior Congressional Budget Office analyst whose job is calculating the costs of overhaul the health system -- an overworked, "amiable father of three" named Phil Ellis -- "is the first to admit that his painstaking numbers are almost certainly wrong," the
Washington Post reports. His estimates "essentially condemned two" bills by pricing them at over a trillion, while boosting another by estimating much lower costs, illustrating the huge political stakes generated by Ellis' guesswork. "But, the agency, while almost universally praised for honest and impartial analyses, does not have a crystal ball."
The Post explains the CBO estimate with a grocery store analogy: "Your history of spending $200 a week at Safeway projected into the future with adjustments for inflation and expected demographic trends (i.e., more children, larger pets). Then it factors in proposed policy changes: Say you want to eat only organic and enroll your husband in Jenny Craig. Costs for meat, produce and dairy would go up, but spending on toothpaste and Saran Wrap would be unaffected. Meanwhile, the extra $70 a week for diet food would be partially offset by lower spending on Cheetos and frozen pizza."
Despite the CBO's wealth of available data, the analysts must make some very broad assumptions about how people and business would behave in the face of sweeping policy changes. Though there's often data from surveys or history available to the analysts, "[i]n some cases, we're just going on economic logic and what's in people's self-interest," Ellis said. He placed his margin of uncertainty at 20 percent. Some critics on the left and advocates of "supposedly money-saving ideas, such as disease-prevention programs" say the CBO chronically underestimates the savings generated by reform ideas. One critic charges that the CBO overestimated the cost of Medicare's prescription drug program by 40 percent. But, defenders point out, their estimate was closer than anyone else's. Jonathan Gruber, an MIT economist, said of the CBO, "Is there something obviously wrong with what they're doing? I don't actually think so" (Montgomery, 10/19).
 This article was reprinted from khn.org with permission from the Henry J. Kaiser Family Foundation. Kaiser Health News, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health care policy research organization unaffiliated with Kaiser Permanente.
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