More Required Reading from the CBO

By June 22, 2009Commentary

The Congressional Budget Office on June 16 released a letter to Senator Kent Conrad regarding health reform.  (CBO Letter) The letter summarizes a number of points previously made in various CBO health care analyses.   In its usual calm tone, CBO again raises the alarm about the likelihood of a continuing rise in health spending in the absence of reforms designed to limit costs and examines several proposed mechanisms to control health expenses.  CBO notes that the budget is way out of balance well into the foreseeable future as it is, and health reform that does not fully pay for itself will only exacerbate that problem.

CBO first makes the obvious observation that the large-scale expansions of coverage being proposed, coupled with federal subsidies for many people, will add greatly to government health spending and that the cost of such coverage expansions has historically been underestimated.  While more coverage would likely lead to less cost-shifting and less uncompensated care, CBO says those items have relatively small effects.  CBO also noted that near-universal coverage could lower administrative costs of providers and payers, but that would result in net savings to the system only if passed on in the form of lower prices.

CBO then acknowledges that research indicates that there is significant inappropriate health care delivery; which if reduced could result in substantial savings.  But it also states that getting efficient care delivery across the system will not be easy, quick or inexpensive and that brute force methods, like across the board payment cuts in high cost areas, raise concerns about whether they will work effectively to ensure quality while only eliminating truly unnecessary care.

While CBO believes accountable care organizations, value-based payment systems and bundled payments all hold promise, it again reminds us that there is little clear evidence on how much they might save, what the unintended consequences might be, or how they can best be implemented.   In regard to comparative effectiveness research, while it could assist in identifying best practices, CBO indicates that the results of such research won’t save money unless coupled with payment or other mechanisms to enforce adherence to the identified best care and that the research itself is costly and it takes some time to complete the necessary studies.

Prevention and wellness services will likely improve people’s health and the quality of their care, but it is very unclear that they will save a lot of money.  Many preventive services, particularly widespread screening, do not have a positive ROI and encouraging healthy behaviors also has an uncertain payback.  Imposing more cost-sharing on patients might help them focus more on what care they really need and on finding lower-priced providers.  Removing the tax exclusion for employment-related health care may do the same.

Finally, CBO looks at options to encourage greater efficiency among providers by reducing some of their payment updates and restraining payments in general.  CBO seems to feel these have value, but notes that politically Congress has been reluctant to support even those payment limitations imposed by existing law.  One comes away from reading these CBO missives with mixed feelings.  We could be optimistic that there are many opportunities for improving cost control or pessimistic about the political and practical difficulties in implementing any of them.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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