The CBO Might Be Wrong, But Orszag Isn't Right

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A group of health economists finally gave the president some good news with a letter arguing that we can bend the long-term costs of health care with Obama's proposed Independent Medicare Advisory Council (IMAC). The IMAC would be like a Supreme Court for health care, delivering binding recommendations to doctors and insurers affecting procedure and cost. Some liberal blogs are counting this a win for Obama and budget director Peter Orszag against the Congressional Budget Office, which had expressed doubts about IMAC's ability to restrain costs. But I'm not as optimistic about the council.


First of all, it must be said that the CBO had no business scoring the ability of IMAC to control costs. You don't invest money in a company that doesn't exist, you don't review films after they announce the director, and you don't score cost-cutting ideas from a theoretical council that hasn't made any cost-cutting suggestions.

But I'm not sure that Orszag's optimism on IMAC is necessarily well-placed. He writes:

This Independent Medicare Advisory Council (IMAC) would make recommendations on Medicare reimbursement policy and other reforms - playing a critical role in allowing health care policy to adjust flexibly to a dynamic health care market, thereby helping contain costs and improve quality over time.

In the abstract, I like the idea of an independent council presiding over the health care system making informed and difficult decisions about medical procedures and payment to control health care costs in real-time. Philosopher kings with stethoscopes: Count me in!

It's the politics of IMAC that continue to trouble me. As I wrote before, I see IMAC as a kind of concession from Obama. It tells me that he understands his limited ability to pass legislation that properly tweaks incentives for private insurers and doctors. So instead of tweaking incentives in the private sector, he's going to defer to an outside expert to rule over it. It's like a marriage-counselor, or a judge for binding arbitration, except for health care policy.

But think about how IMAC's policy recommendations could work out politically. The reason to take health reform out of politics is that we're afraid Congress will vote down the toughest, most substantial reforms. But once tough IMAC recommendations are authorized and mandated by the government through this occult agency, you can bet that lobbyists and other groups will come screaming to Congress, branding hot-button terms like "rationing," and demanding a law to overturn the recommendations.

I spoke briefly to a colleague about my concerns, and he assured me that IMAC would at least raise the average of health care reforms. After all, you achieve zero percent of the reform recommendation you don't make. Also, even if some IMAC recs are shot down after a lobbyist or popular uprising, you at least live in a world where those recommendations are enacted first, and voted on second.

How much popular pushback would IMAC withstand? I don't know. But it's not hard to imagine Americans, rightly or wrongly, feeling besieged by an un-democratic body of experts sticking their noses in the doctor-patient relationship. IMAC would begin to look less like a group of benevolent Delphic oracles and more like a wrathful god throwing lightening bolts into the health care system.

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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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