Two Plus Two Is Four — Or Is It? Obama’s Health Summit

Health Care Reform was supposed to be on the operating table for all 7.5 hours of last week’s bipartisan Health Summit.  But was it? And how many of the Congressional surgeons were practicing economics and how many were specializing in politics?

Some came to the table quite skeptical of any purpose beyond the PR, useful for themselves as well as for their President in this widely televised event.  Obama was widely criticized for releasing the Obama-Biden “Plan To Lower Health Care Costs and Ensure Affordable, Accessible Health Coverage for All” 3 days before, not after, this big event.  “How,” his detractors queried, “could we believe that he really wants to listen to us, that he’s really open to change, if he already has another plan in his pocket?”  These are the same people who were complaining that the President had put nothing himself on the table and had left all the work to Congress.  At last the President has something of his own in hand.

As for the economics, Douglass Elmendorf, Director of the Congressional Budget Office (CBO), politely reported that he needed much more than 3 days to estimate the 10-year costs of the new plan and accordingly would have no figures to share with participants in the Health Summit.   He, like us, had just received the plan on February 22, and the summit was scheduled – and held – on the 25th.

Not only did Elmendorf need more time, he needed more details.  On his “Director’s Blog” the man Nancy Pelosi promoted noted that “preparing a cost estimate requires very detailed specifications of numerous provisions, and the materials that were released this morning do not provide sufficient detail on all of the provisions.” (For more, see  Elmendorf.) Widely described as 11 pages of bullets, when viewed in the normal font size of 12, the plan is in fact a mere 7.5 pages of text with 1.5 pages of footnotes.

There’s a refreshing honestly in the cautionary note about how much the Obama-Biden Plan costs that’s sorely absent in assessing the House and Senate health-care reform packages. The CBO can’t accurately estimate their true costs either. Even though they weigh in at 1990 and 2074 pages, respectively – and before adjusting for over-sized font size and margins, these plans still lack the specificity of detail necessary for the CBO to make good forecasts. CBO scores are only as good as the data and the assumptions the office is given.

Perfect predictions about the net-cost consequences of changing 1/5 of any economy, much less one as large and complicated as this one, are beyond our reach.  A program as ambitious as the House and Senate bills and the White House plan would have unintended as well as intended consequences. When one variable is changed deliberately through legislation, several others will change responsively through masses of private and individual choices made in the context of new incentives and disincentives.  The further out the data are projected, the less accurate any estimates are likely to be.

This problem is compounded by chicanery, a willful manipulation of the facts.  Perhaps, given the nature of politics, it too is unavoidable.

At the Health Summit, Paul Ryan, R-Wisconsin and Ranking Member – Committee on the Budget, said he shared the President’s goals of containing health-care costs and was going to analyze the Senate Bill’s alleged cost savings because it is the closest to the Obama-Biden Plan, for which, as earlier noted, we have insufficient detail.  Ryan praised the CBO, but not the score it gave the Senate Bill. “They do their jobs well. But their job is to score what is placed in front of them. And what has been placed in front of them is a bill that is full of gimmicks and smoke-and-mirrors.”

And then Ryan proceeded to “unpack the Senate score a little bit.”   The result of “strip[ping] out the double-counting and …gimmicks” is to replace an estimate of $131 billion in budget surpluses for the first 10 years (as far out as the CBO was instructed to go) with one of $460 billion in losses.  Projecting only 10 years into the future is itself sneaky, because it captures only 6 years of program expenses while collecting revenue and paring Medicare taxes for the whole decade.  Extending the formulae out a second 10 years adds  $1.4 trillion to the Senate Bill deficit.  (See   “Hiding Costs Doesn’t Reduce Costs” for details and a video of Ryan’s remarks.)

Throughout the Health Summit, President Obama supported “discussion” and scorned and even shut down “talking points” and detailed analysis that he thought had more to do with campaigning than with governing.  He did, however, accord ample time to the wrenching and highly politicized stories of Americans denied medical treatment and even life itself because they were denied insurance coverage.

To Ryan, Obama accordingly responded thusly: “I’m going to call on Xavier Becerra, but I just want to follow up on a couple points. There are some strong disagreements on the numbers here, Paul, and, you know, but I don’t want to get too bogged down in — the first question I have is whether your side thinks Medicare Advantage is working well.”  He then talked about closing doughnut holes in Medicare Advantage.  The President didn’t debate or discuss any of the financial details Ryan critiqued, nor did he address the budget assumptions that Ryan exposed as so ridiculous. Rather, he gave Xavier Becerra, D-California, the floor.

Becerra began by accusing Ryan of distrusting the CBO, which he repeatedly referred to as the “referee”.  He seemed incapable or unwilling to acknowledge the distinction between the quality of the people who work at the CBO and the quality of the assumptions and facts they are given to analyze. Perhaps Ryan should have reminded him of the acronym GIGO – Garbage In, Garbage Out.  Bad data entered into even the best of computers yield faulty results. “If the referee’s on the field,” Becerra said, “we have to accept what the referee says.”  And then he went on to explain how the government is going to save millions by cutting Medicare waste. “Doughnut holes” reappeared as a second metaphor.  Just like Obama, Becerra appears to have missed Ryan’s big point: “You can’t say that you’re using this money to … extend Medicare solvency and also offset the cost of this new program. That’s double counting.”

Perhaps Health Care Reform can’t really go on the operating table until its doctors are themselves healed.  Until then, we’re stuck with an anonymous old joke about accountants applying for jobs and an old poem by the old A.E. Housman about arithmetic:

“What does 2 + 2 equal?”
”What number did you have in mind, sir?”

To think that two and two are four
And neither five nor three
The heart of man has long been sore
And long ‘tis like to be.