Health reform reality check: The cost

The Congressional Budget Office is set to roll out cost estimates for health reform proposals. Watch the temperature soar.

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By Jeanne Sahadi, CNNMoney.com senior writer

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CBO chief Douglas Elmendorf will soon publicly unveil estimates of health care reform costs.

NEW YORK (CNNMoney.com) -- Ah, summer: Time to enjoy a quiet vacation. Kick back with a good book. Walk on the beach.

Not Douglas Elmendorf. He'll spend the next two months suffering voodoo-eyes from powerful people on Capitol Hill.

Elmendorf is director of the Congressional Budget Office, the ordinarily low-profile federal agency that will estimate how much money health reform will cost or save.

The CBO's estimates, the first set of which are due next week, carry a lot of weight because Congress uses them in making legislative decisions.

In an age of trillion-dollar budget deficits, the numbers will carry even more weight than usual.

"Strictly speaking, the CBO advises the budget committees, and the committees can override what CBO recommends. But they rarely do," said Robert Reischauer, who headed the CBO during the infamous health care debate during the Clinton administration.

That's because CBO is known for providing objective analysis in a partisan town.

That doesn't mean there won't be serious griping and spinning on the part of lawmakers, lobbyists or the White House budget office, which makes its own estimates.

During the debate over the Clinton plan in the early 1990s, the Washington Post called Reischauer "the most powerful umpire in Washington."

Reischauer, who is now president of the Urban Institute, believed the Clinton plan would have cost more than the White House estimated. And he also would have accounted for it in such a way that it would have expanded government spending as a percentage of GDP. That was exactly what the White House didn't want since government expansion was catnip for Republican opponents of the plan.

Spiral in health costs

Elmendorf in some ways is under even greater pressure than Reischauer, under whom he worked during the Clinton era.

The CBO today is scoring proposals in the face of a federal balance sheet with eye-popping deficits that health care reform aims to curb.

The agency estimates that the amount of money the government, businesses and individuals spend on health care this year will be about 18% of GDP. It's on track to top 20% by 2018. And federal spending on Medicare and Medicaid will have doubled by 2019 from where it is today.

By 2035, the Government Accountability Office estimates that all federal revenue will be consumed by Medicare, Medicaid and interest on the public debt.

When Reischauer headed the CBO, "the health care challenge was 'Don't make the [budget] situation worse.' Now, it's 'Do health care reform so we can make the budget situation better,' " he said.

Indeed, he added, "some of the biggest pressures [Elmendorf] will face are being asserted by advocates of health reform, not opponents. They desperately want reform to succeed and their proposals to pay for it to be sufficient to cover its costs."

More art than science

Figuring out whether they can is a job the CBO will perform with more health analysts on board and more data than was at its disposal in 1994.

Despite that, the task at hand is difficult because the agency will be forecasting the effects on individuals and businesses of unprecedented changes in the health care system.

"There are a lot of proposals that we think should reduce health care costs over time. The evidence is uncertain. The impact will depend very much on details yet to be specified, and on our ability to implement them in a smooth, efficient way," Reischauer said.

Elmendorf told the National Journal his goal is to find the middle ground -- neither too pessimistic nor too optimistic about how much a proposal will cost or raise.

"Our job is to be in the middle of the distribution of possible outcomes," he said.

In addition, the agency's preliminary estimates may well have some holes in them if lawmakers don't supply sufficient information about a measure for the CBO to score. The biggest case in point: the proposal to add a government-funded insurance plan to compete alongside private insurers. So far, its supporters haven't specified a definitive framework for one in a bill.

Nevertheless, Democrats are still aiming to have a bipartisan health reform bill voted through both chambers by August and President Obama has said he wants a bill on his desk by October.

Whether that's realistic or not is anyone's guess. But one thing is certain: CBO will be running fast between now and then to keep up with every twist and turn in the legislation along the way. To top of page

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