Many Senate hearings are mere theater, but one that took place on July 16, 2009, mattered. With Congress in the(11) midst of writing the bill that became Obamacare, senators asked Douglas Elmendorf, the director of the Congressional Budget Office, to evaluate their efforts.
In the hearingÃ¢â¬â¢s pivotal moment, Senator Kent Conrad Ã¢â¬â the North Dakota Democrat who was then the Budget Committee chairman Ã¢â¬â asked Mr. Elmendorf whether the legislation was likely to curb the growth in health costs, as its advocates asserted.
Ã¢â¬ÅFrom what you have seen,Ã¢â¬Â Mr. Conrad asked, Ã¢â¬Ådo you see a successful effort being mounted to bend the long-term cost curve?Ã¢â¬Â
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Mr. ElmendorfÃ¢â¬â¢s answer was clear. Ã¢â¬ÅNo, Mr. Chairman,Ã¢â¬Â he said. Ã¢â¬ÅWe do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.Ã¢â¬Â
For anyone who remembered health care history, the moment was ominous. It recalled the role that the budget office Ã¢â¬â CongressÃ¢â¬â¢s official scorekeeper Ã¢â¬â played in scuttling President Bill ClintonÃ¢â¬â¢s efforts to pass a health care bill. (Mr. Elmendorf, as it happens, was an obscure staff member on the C.B.O. team evaluating the Clinton bill.)
ABC News called the July 2009 hearing Ã¢â¬Åa blow to President Obama and Democrats pressing health care reform.Ã¢â¬Â The Washington Examiner, a conservative publication, later wrote that Mr. Elmendorf had Ã¢â¬Åhelped fuel the cross-country uprising against the health plan.Ã¢â¬Â Liberals, meanwhile, tried to fight back by citing other experts who seemed more upbeat than Mr. Elmendorf.
But congressional Democrats knew that the budget office had the loudest voice, and their staff members got to work (which may have been Mr. ConradÃ¢â¬â¢s purpose in asking the question). They added provisions to nudge the health care system away from paying for the quantity of medical care rather than the quality.
Ultimately, the C.B.O. judged those provisions to be substantive. The Affordable Care Act would reduce the deficit in the long run, the budget office forecast, because its new taxes and its cost-cutting would exceed the new spending on health coverage for the uninsured.
That judgment is back in the news again because Republican leaders in Congress are trying to decide whether to reappoint Mr. Elmendorf as the budget office director. Several conservative intellectuals Ã¢â¬â like Gregory Mankiw of Harvard and Charles Murray and Alan Viard of the American Enterprise Institute Ã¢â¬â support another Elmendorf term. Some conservative activists oppose him, in large part, as my colleague Jonathan Weisman wrote, because of his Ã¢â¬Åpositive assessments of the cost and impact of the health care law.Ã¢â¬Â
This column isnÃ¢â¬â¢t going to take a position on Mr. Elmendorf. I understand why Republicans might want to appoint one of their own, rather than someone who previously worked at the Brookings Institution and the Clinton Treasury Department. I also see why Republicans might see value in re-appointing someone with Mr. ElmendorfÃ¢â¬â¢s rÃÂ©sumÃÂ© (which includes a high-level stint at the Federal Reserve) and credibility.
WhatÃ¢â¬â¢s struck me about the debate is how it highlights our resistance to good economic news. A central plank of the anti-Elmendorf case is the notion that his budget office has underestimated health care costs. Senator Pat Roberts, the Kansas Republican, went so far this year as to call for a hearing on the subject.
In reality, the Congressional Budget Office Ã¢â¬â like nearly every other group of health care analysts Ã¢â¬â has overestimated medical costs. WeÃ¢â¬â¢re in the midst of a historic slowdown in the growth of medical costs, in which a series of loosely affiliated efforts to cut waste seems to be paying off. Total national spending on health care last year grew at the slowest rate since records began in 1960, the Centers for Medicare and Medicaid Services reported last week.
The Affordable Care Act Ã¢â¬â specifically, those provisions meant to reward quality, like one that tries to cut down on needless hospitalization Ã¢â¬â plays some role in the slowdown but is not the main cause. It was instead part of a broader effort among doctors, nurses, hospital executives, policy makers and others to reduce waste. Whatever the cause, though, the result is clear: The Congressional Budget Office has modestly reduced its estimate of the lawÃ¢â¬â¢s cost since it passed.
Beyond the health law, the budget office has repeatedly cut its estimates of overall health care spending. It now expects Medicare to spend about $11,000 per beneficiary in 2016. As recently as 2006, the forecast for 2016 was about $15,000. Multiplied by millions of Medicare recipients, thatÃ¢â¬â¢s real money.
How, then, are the budget officeÃ¢â¬â¢s critics claiming otherwise? Mostly through accounting tricks. For starters, they tend to look only at portions of the health law that spend money and ignore those parts that cut spending or raise taxes. ItÃ¢â¬â¢s akin to saying a family is going bankrupt because it bought a new car Ã¢â¬â while overlooking that it also canceled a vacation and that Mom received a raise.
Within the parts of the law that spend money Ã¢â¬â the car in my analogy Ã¢â¬â critics have ignored programs that are costing somewhat less than expected and emphasized those that are costing somewhat more. Or, perhaps most common, they have made much out of the fact that the lawÃ¢â¬â¢s costs rise as it covers more people, claiming that the budget office didnÃ¢â¬â¢t expect that increase (which is false).
I realize that some of these claims arenÃ¢â¬â¢t meant to be serious economic arguments. TheyÃ¢â¬â¢re political ones, intended to influence a political choice. But Mr. ElmendorfÃ¢â¬â¢s critics are hardly the only ones taking a gloomy view of the health care system, even as the evidence keeps offering new reasons for optimism.
Last weekÃ¢â¬â¢s report on medical costs, for example, showed that health spending made up 17.4 percent of economic output last year, a level that has not changed in four years. ItÃ¢â¬â¢s stunning. In the previous four years, the share jumped 1.9 percentage points, from 15.5 percent. Back then, analysts viewed an ever-expanding health sector Ã¢â¬â one that drove up the deficit, crowded out spending on schools and highways and cut further into AmericansÃ¢â¬â¢ paychecks Ã¢â¬â as inevitable.
To be clear, no one should declare victory yet. There is a serious debate about what will happen with health spending in coming years, as the population continues to age and the ranks of the uninsured presumably shrink. But itÃ¢â¬â¢s silly to wave away the health-cost slowdown as meaningless Ã¢â¬â or to pretend that health costs are actually surging.
Twenty-five years ago, Gregg Easterbrook wrote a cover article for The New Republic titled Ã¢â¬ÅThe Sky Is Always Falling,Ã¢â¬Â in which he lampooned the rest of the news media for being able to find the dark lining in any economic trend. Wage growth is weak? Start the recession watch. Wages are surging? Time to fear inflation.
There are real consequences to such perma-pessimism. If you think every development is cause for gloom, you canÃ¢â¬â¢t distinguish between the economyÃ¢â¬â¢s real problems Ã¢â¬â of which there is no shortage Ã¢â¬â with the potential solutions to those problems.
How two variables which are compared in economics, prepare a comparison of the US costs for health care and another first world country and their health care costs.