Costly leaps of faith on health care

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Assuming that President Obama is able to move past the rocky first weeks of his presidency -- starting with naming a Health and Human Services secretary to replace Tom Daschle -- we're going to be hearing a lot about how to solve the endemic problems in the American health care system. Along with those proposals, we're going to hear a lot of numbers being thrown around. Be skeptical.

As any business owner or HR professional can tell you, it's nigh on impossible to accurately predict what a company's health care expenses are going to be in a given year, let alone make multi-year projections.  As a matter of fact, that's one of the reasons why the business community is less opposed to national health reform than it has been in the past: health care spending for employees and retirees is accerlating at an unsustainable rate, consuming more and more of companies' operating budgets.

Large employers and health insurance companies have tried to address for decades. Remember the '80s and '90s? HMOs were supposed to fix everything. They didn't.

Policymakers face the same uncertainty when it comes to estimating the net cost of health reform concepts small and large. But, like their counterparts in the private sector, estimate they must. On Capitol Hill, the final arbiter is the nonpartisan Congressional Budget Office.

So it was very sobering indeed to hear the director of the CBO, Doug Elmendorf, explicitly acknowledge Tuesday that it's basically impossible to predict exactly what effect a series of reform iniatives will have on spending.

At a hearing of the Senate Budget Committee (which was just as riveting as you'd imagine), Elmendorf responded to a question from Sen. Jeff Sessions (R-Ala.) about whether focusing on preventive medicine would save money. His answer could apply to practically any health reform:

"The healthcare delivery system and the healthcare financing system are both incredibly complex, and changes to any part of those systems could reverberate through the system in ways that are very difficult for analysts like those at CBO to anticipate."

Allow me to add emphasis to that last phrase: "very difficult for analysts like those at CBO to anticipate." The CBO commands a tremendous amount of respect in Washington, and for good reason. Plus, Elmendorf's predecessor (current White House budget director Peter Orszag) beefed up the agency's health staff. Nevertheless, the head of the agency still has to concede that he can't predict everything. If CBO can't, I'd wager nobody can and I'd be pretty suspicious of anyone who claimed otherwise.

Ultimately, all large-scale federal policy initatives are leaps of faith that are made based on a combination of ideology and math (plus a dose of special-interest appeasing, naturally).  George W. Bush and the Republican-led Congress faithfully leapt toward health savings accounts and increasing the role of private health insurers in Medicare. For Barack Obama and the Democratic-led Congress, it's public-program expansions and greater insurance regulation. Either way, they have to take their leaps with one eye on a CBO report and the other eye shut, then hope for the best. 

(If you're so inclined, you can download Elmendorf's written testimony here and some major CBO reports on health reform here and here. You can even watch video of Tuesday's hearing if you'd like. I will warn you, though, that there's a reason I often describe my job as "we go so you don't have to." I wrote an article this week about the politics of health reform and the federal budget that I have no such misgivings about pointing you to. UPDATED: I forgot to link the Elmendorf's blog post on his testimony.)

Jeffrey Young is a staff writer at The Hill.

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Jeffrey Young

Jeffrey Young is a staff writer at The Hill, the newspaper for and about Congress, where he covers health care, lobbying, politics, and the intersection thereof for the "Business & Lobbying" section. He's been covering health policy in Washington for a decade and still hasn't heard that one good idea that will fix everything. Email Jeffrey at jeffrey.young.atlanticbusiness@gmail.com
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