CBO Is Usually Wrong on Health Reform Numbers

The Congressional Budget Office is a much-respected institution, and its integrity is beyond question, but it’s got a really lousy record when it comes to estimating the effects of health care reform, writes researcher Jon Gabel in the New York Times. It has drastically underestimated savings from each of the last three major Medicare reforms. It thought the '80s switch to flat-fee payments, for example, would save $10 billion over three years; it saved that much in 1986 alone.

It underestimated the savings from 1997’s fraud prevention methods by 50%, and from 2003’s prescription drug reforms by 40%. The problem is the CBO’s forecasting methodology, which operates on historical data. If something’s never been tried before, the savings are considered “unknown,” which often translates to “zero” no matter how illogical that is. It’s discounted similar cost-cutting measures in the current debate, making reform harder to pass than it should be. (More health care reform stories.)