• A former CBO analyst on scoring health reform

    Chapin White, with whom I worked briefly almost a decade ago, was a CBO analyst from 2004 through 2010 and worked on scoring the health care reform bill. He put his thoughts in an Economist’s Voice (Berkeley Electronic Press) paper. Chapin is not optimistic about cost control.

    [T]he new Independent Payment Advisory Board (IPAB) has been touted as the ACA’s “most important institutional change.” The concept was to delegate to a body outside Congress the authority to make fiscally-sound, but unpopular, changes to Medicare. But IPAB is highly constrained in its design. Its reforms are limited in nature (no rationing, no restricting benefits); in scope (hospitals and most other providers are off-limits until 2019); and in timing (IPAB can only make reforms if projected Medicare-spending growth exceeds a target growth rate). Crucially, IPAB’s target growth rate—GDP per capita plus one percentage point—is unsustainably high, which essentially ensures that IPAB will not solve Medicare’s long-term financing problem.

    Sigh. But what about ACOs?

    The concept behind ACOs is to encourage medical providers to form integrated systems, and to incentivize those systems to reduce utilization while meeting quality benchmarks. But under the ACA, provider participation is purely voluntary, and incentives are one-sided: Bonuses are available for ACOs that come in below a spending target, but there is no penalty for overshooting. Some ACOs will likely end up earning windfall bonuses due to the natural variability in health spending. CBO guessed that, on the whole, ACOs would very modestly reduce Medicare spending, but those windfalls could very easily end up increasing it instead.

    There’s really nothing new here. It just sounds all the more pessimistic coming from a guy who worked on scoring the bill. I’ve never claimed or been convinced that the ACA’s cost controls were sufficient or substantial. That’s why I regularly argue that they need to be preserved and strengthened. I concede that the latter is not likely, not soon anyway.

    The optimistic view is that the ACA puts in place a structure that can support serious cost control. No other proposal does that. It’s up to us (or our elected officials and their designated bureaucrats, really) to do something serious with that structure. A skeleton with no muscle can’t deliver much of a punch. Right now, on cost control, the ACA is just a bag of bones.

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    • If memory serves, it was either Ryan’s plan or Bowles-Simpson that was also going to restrict Medicare spending to GDP plus 1%.

      Steve