Health reform cost? Nobody really knows

Lawmakers wait with bated breath to hear how the Congressional Budget Office will assess the cost of a bill. But such rulings are not gospel.

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By Jeanne Sahadi, CNNMoney.com senior writer

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NEW YORK (CNNMoney.com) -- There's nothing like getting a good grade. That's how the Congressional Budget Office's preliminary analysis of the Senate Finance health reform bill is being portrayed.

CBO, the nonpartisan arbiter on the cost of legislation, estimated this week that the Finance Committee bill would reduce the country's deficits by $81 billion over 10 years.

That figure fits nicely with President Obama's promise that he won't sign any health reform bill that increases the deficit by even "one dime."

So just how reliable is that long-range forecast?

The agency is highly regarded for its competence and independence. But the fact is there's no telling whether the agency's analysis is right, or even on the right track.

"You don't go to the bank with the $81 billion," said Robert Reischauer, president of the Urban Institute who served as CBO director during the 1993 health reform debate. "There's huge uncertainty surrounding this."

That's because with any legislation -- but particularly bills pertaining to uncharted terrain like restructuring the health care system -- the agency can't be an all-knowing seer and has no control over the players and events that can render the agency's assumptions and analyses moot.

"The future is not what the law says," said former CBO director Douglas Holtz-Eakin, who served as a chief adviser to John McCain during the Republican senator's run for president last year.

In other words, reality is almost guaranteed to get in the way of the most meticulous CBO analysis. The economy's performance can defy projections. A new administration can upend what the previous one did. Mother Nature, terrorism or a deficit-busting economic meltdown can rearrange national priorities overnight.

And lawmakers themselves can -- and often do -- change their minds after a law is enacted. The CBO will assess, or score, the effects of an amendment to a law, but it does not comprehensively re-score the entire law.

Another popular move: Presidents may request more money for war efforts well after the budget for a given year has been decided.

Holtz-Eakin is confident that CBO did the math right in its assessment of the Finance bill as it was given to them. But in some areas the agency had to score what Holtz-Eakin considers "an elaborate fantasy" that's "politically unrealistic."

Specifically, he cites the savings attributed to the bill's provisions that limit the growth in Medicare spending over the years. In years past Congress has voted to rescind similar measures under pressure, and it's still not clear whether the Senate bill's proposed Medicare commission would be given the authority to override lawmakers' impulse to do so again.

Of course, even if a law is not amended, the CBO scoring won't be perfect either.

One example is the Medicare Part D prescription drug bill a few years ago. Holtz-Eakin noted that when he was running the agency, it ended up overestimating how much the bill would cost by 30%.

But CBO actually got closer to the mark than the Medicare trustees, who projected that the provision would cost even more.

Indeed, the CBO is not the only scorekeeper in town, although it is the one lawmakers use.

"[The agency's scores are] on average as good as it can get," said Holtz-Eakin, who ran CBO from 2003 until 2005. "You may see people do better on a particular issue but not on the range of issues that the CBO handles."

Without CBO, lawmakers would make decisions blind, without any independent yardstick on cost.

As the health reform debate enters the home stretch, Howard Gleckman, a senior research associate at the Urban Institute, recommends some skepticism as lawmakers start "haggling over some last-minute idea" intended to keep the cost of the bill under a magic threshold.

"In truth, nobody will actually have a clue about what these changes will cost or save," Gleckman wrote in the Tax Policy Center blog Tax Vox. "If we are lucky, they'll get the direction right." To top of page

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