Democrats' plans to pass major health care legislation have been stymied, at least for the moment, by the Congressional Budget Office's cost estimates. To the consternation and apparent surprise of leading Democrats, the CBO scored Senate Finance Chairman Max Baucus' latest offering at $1.6 trillion over 10 years, while it scored the completed sections of Sen. Christopher Dodd's bill at $1 trillion. Presumably, the incomplete sections would cost more.
The senators and the Obama administration might not have been so unpleasantly surprised had they paid closer attention to CBO Director Douglas Elmendorf's testimony to Baucus' committee delivered back on Feb. 25. Elmendorf, by the way, is no leftover hack from the Bush administration -- he is a Harvard-trained Ph.D. economist formerly at the Brookings Institution and appointed to his current position by congressional Democrats. My soundings indicate he is highly respected by economists associated with both political parties.
Elmendorf's February testimony, in crisp language punctures some of the balloons that have been sent aloft in Democrats' campaign talk about health care. One is the idea that since a lot of health care spending seems to be ineffective, it can be easily reduced by government action.
"The available evidence also suggests that a substantial share of spending on health care contributes little if anything to the overall health of the nation," Elmendorf said, agreeing with the first half of the proposition. Then he added, disagreeing with the second half, "But finding ways to reduce such spending without also affecting services that improve health will be difficult." It's like advertising: Half is wasted, but we're never sure which half.
Then there are the assurances by Office of Management and Budget Director Peter Orszag that by using the results of comparative-effectiveness research -- studies of the results of treatments in different regions and facilities -- we can easily identify the most cost-effective health care procedures and, using the power of government, force all practitioners to do things that way.
Elmendorf admitted that the benefits of such research "suggest a role for the government in funding research on the comparative effectiveness of treatments, in generating measures of quality, and in disseminating the results to doctors and patients." But then he threw some cold water on the proposition that such research could be used by government to jam down costs. "Absent stronger incentives to control costs and improve efficiency, the effect of information alone on spending will generally be limited."
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