CBO Chief Doug Elmendorf's Strange Ride

Follow this timeline: On July 16, 2009, Congressional Budget Office (CBO) leader Doug Elmendorf told a Senate Budget Committee that neither the Senate nor the House version of healthcare reform legislation then under consideration would reduce the trajectory of federal health spending by a significant amount.

“And on the contrary,” Elmendorf said, “the legislation significantly expands the federal responsibility for health care costs…The creation of a new subsidy for health insurance, which is a critical part of expanding health insurance coverage in our judgment, would by itself increase the federal responsibility for health care that raises federal spending on health care.”

This was an inconvenient message for a President determined to sell healthcare reform to a skeptical public by saying that it would bend the cost curve down.

A few days later, President Obama took the unusual step of inviting Elmendorf to the White House to “discuss” healthcare costs. Why was this step unusual? Because the CBO’s main role is not to advise President Obama on economic matters; that job falls to Budget Director Peter Orszag, Elmendorf’s predecessor at CBO. Rather, CBO was created by Congress as an overseer of the White House and its use of budget and fiscal projections.

CBO is responsible for producing an annual economic forecast, reviewing the administration's annual budget submission, scoring all spending legislation reported from committee and passed by the Congress, and preparing reports for Congress, among other things. In short, the purpose of the CBO is to offer independent analysis of projections that have the potential to be manipulated for political gain.

Whatever was said at the meeting between Elmendorf and President Obama, a new CBO analysis issued on March 20, 2010, estimated that the net effect of passing ObamaCare would be a reduction in the federal deficit by $143 billion over the first decade. That analysis was loaded with the appropriate caveats, including a statement cautioning that the CBO couldn’t make an estimate of the discretionary costs without more time and information. But never mind; the President needed a bill, and fast! The timing of the CBO analysis -- one day before the House passed the Patient Protection and Affordable Care Act, and its headline-friendly “$143 billion saved” -- seemed to give the bill’s backers renewed energy.

We know what happened next.

Now, as we learn more about what’s in the bill and how the administration plans to pay for it, Elmendorf and the CBO are back with some new projections and an analysis that is eerily similar to the views that got the CBO director an “invitation” to the White House. In a presentation to the Institute of Medicine late last month, Elmendorf eviscerated the idea that ObamaCare will bend the cost curve down.

In the very first of a series of succinct and alarming slides, Elmendorf states, “Rising health costs will put tremendous pressure on the federal budget during the next few decades and beyond. In CBO’s judgment, the health legislation enacted earlier this year does not substantially diminish that pressure.” Another slide in the presentation states, “It is not clear what specific policies the federal government can adopt to generate fundamental changes in the health system. That is, it is not clear what specific policies would translate the potential for significant cost savings into reality.”

As economist and blogger Keith Hennessy (no relation) wrote recently, “This is the best and most direct presentation I have seen on the subject. I commend Dr. Elmendorf for his honesty, clarity and bluntness. I wish he had been this blunt and this clear in February and March before these bills became law.”

President Obama and Democratic leaders told us when they passed the Patient Protection and Affordable Care Act that the American public would grow to like it. That certainly hasn’t happened yet. The week after the law passed in March, a Rasmussen poll showed that 55% of voters supported the repeal of the law, while 42% did not. Last month, 56% wanted the legislation repealed, versus 39% who did not. Budget challenges aside, there is the still the matter of the constitutionality of the law, which is being challenged by 20 state attorneys general.

My hope is that this law will be repealed, and not because it would be a political disaster for Democrats. It’s a disaster for them already. But I hope it's is repealed so that we can start over and return to the simple reforms that would work without crippling our economy; increase competition and patient awareness of costs; align incentives properly; and pursue major medical malpractice reform.

There is still a chance to start over and get this right.