Did the Congressional Budget Office just kill the public option?

How to fix health policy.
Oct. 30 2009 2:30 PM

Public Option, RIP?

The Congressional Budget Office explains the perils of compromise and the limits of its own interest in health costs.

Click here for a guide to following the health care reform story online.

(Continued from Page 1)

The logical solution is to revert to a "robust" public option that would align doctor and hospital payments with Medicare, thereby re-establishing the public option's price advantage. But Pelosi doesn't have the votes for that, and neither does Reid.

Depressing, no? There is, however, a silver lining to be found in a separate CBO analysis released Oct. 30.

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What does it mean, the CBO asks, to "bend the cost curve"? The answer is more complicated than most acknowledge because there isn't one cost curve—there are four. One curve shows growth in the overall federal budget deficit. A second curve shows growth in federal spending on health care. A third curve shows growth in health care spending by both government and the private sector. And a fourth curve shows growth in health insurance premiums. (A cynic might add a fifth curve showing growth in political contributions from health insurers.)

The CBO can do a decent job predicting growth in the first two curves, it says, because government spending is its primary area of expertise. But the third and fourth curves require calculations regarding private industry and the larger economy that take CBO outside its comfort zone.

Here's how the CBO puts it:

Major proposals to reform health care would affect not only the federal budget but also spending for health care by individuals, firms, and other levels of government. A broad measure encompassing those effects would be the impact on total national health expenditures. However, CBO does not analyze [national health expenditures] as closely as it does the federal budget, and at this point CBO has not assessed the net effect of health care reform proposals on those expenditures, either within the 10-year budget window or for the subsequent decade. That is, CBO has not evaluated whether reform proposals would lower or raise—or bend down or up—the 'curve' of national health expenditures.

I take this to mean not only that the CBO declines to project health reform's overall effect on health expenditures, but also that its individual calculations projecting, say, the price of private health insurance premiums relative to public-option premiums should be taken with a grain of salt. At the CBO, economists get paid to measure government spending. They don't get paid to measure spending in the larger economy. So don't get too worked up over their findings when they do.

AP Video: Nancy Pelosi on Health Care

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