With cost at the pinnacle of healthcare reform debate in Washington D.C., a new study finds the Congressional Budget Office might not always calculate savings correctly.
When faced with the challenge of projecting the economic impact of health reform measures, the CBO has historically underestimated savings and overestimated costs, according to researchers for a Commonwealth Fund study.
The problem, according to the study, lies with the agency's "cautious methods."
Jon Gabel, a senior researcher at the National Opinion Research Center in Washington, D.C., argues that the CBO's reliance on historical precedent in estimating costs of reform often leave little room for estimating savings, especially when major incentives have been added. "Too often, a lack of information is taken to mean zero savings, but zero is not a logical estimate," he said.
The study examined three major changes made to healthcare financing in recent decades to see how the CBO estimated changes in spending and what the actual outcomes of the new policies were.
The study targeted the change made in 1983 to the way Medicare pays hospitals under the prospective payment system and diagnosis-related groups; changes in the payment of hospitals, skilled nursing facilities and home healthcare under the Balanced Budget Act of 1997; and the Medicare Modernization Act of 2003, which, among other things, made prescription drug coverage available to Medicare beneficiaries.
In each case, researchers said, the CBO substantially underestimated savings and thereby overestimated the cost of Medicare to the federal budget.
The current healthcare overhaul packages being considered by Congress are estimated by the CBO to cost from $800 million to $1 trillion, a price tag some lawmakers say is too high.
The Obama administration says it supports proposed healthcare reform currently under consideration that it claims is budget neutral.
The reform bills and other recent legislation include several elements to cut costs, including a crackdown on Medicare fraud and waste, money for implementing pay-for-performance measures and an emphasis on the use of healthcare IT.
"If history is our guide, the combined effects of these shifts will be far greater than the sum of the independent effect of each change," Gabel said.