‘Little Evidence’ to Back-Up Obama’s Cost-Savings Claims

By Matt Cover | April 19, 2011 | 9:19am EDT

CBO Director Douglas Elmendorf (AP photo)

(CNSNews.com) – President Barack Obama claims his budget plan will achieve “well over $1 trillion” in savings by building on the cost savings found in his signature health care law. There is “little evidence,” however, that the so-called health care reforms will ever save any money, according to the Congressional Budget Office.

“Building on the Affordable Care Act, the President is proposing additional reforms to Medicare and Medicaid designed to strengthen these critical programs by reducing waste, increasing accountability, promoting efficiency, and improving the quality of care,” Obama’s budget blueprint says, without offering any specifics.

“Over the subsequent decade, the President’s proposal will save well over $1 trillion by further bending the cost curve, doubling the savings from the Affordable Care Act.”

However, CBO already has reviewed provisions in the Affordable Care Act that purport to bring down health care spending – what Obama calls “bending the cost curve” – and found little evidence they will bear fruit.

“The legislation set up a number of experiments in delivery and payment systems to induce providers to offer higher-quality and lower-cost care. However, for a number of reasons, it is unclear how successful the experiments will be,” CBO Director Douglas Elmendorf said in October 2010.

“There is little reliable evidence about exactly how to move Medicare in the directions that many experts recommend; much more work needs to be done on measuring the quality and value of care; how federal agencies will administer the law is not knowable at this point; and the legislation included significant limitations on the experimentation that will occur.”

CBO concluded that given the lack of evidence and specificity for the cost-savings claims, it was unlikely that they would save any significant amount of money.

“As a result, CBO projects limited savings from the experiments in delivery and payment systems during the next decade,” Elmendorf said.

CBO also reviewed the proposal cited by Obama as the primary vehicle for saving “well over $1 trillion” -- the Independent Payment Advisory Board – and found that it would save only about $2 billion between 2010 and 2019.

“CBO estimates that enacting the proposal, as drafted, would yield savings of $2 billion over the 2010–2019 period (with all of the savings realized in fiscal years 2016 through 2019),” CBO said in a July 2009 letter.

The Independent Payment Advisory Board – under Obama’s proposal – would recommend ways to save money by making health care delivery more efficient. Medicare would incorporate these changes and use its large market presence to force those changes on the broader health care market.

CBO, however, cast doubt on the advisory board’s ability to ever actually do this, saying that because the plan lacked specific details for reducing costs, there was little evidence the board would ever save anyone any money.

“In CBO’s judgment, the probability is high that no savings would be realized…but there is also a chance that substantial savings might be realized,” CBO’s 2009 letter stated.

Obama, in his budget framework, makes the Independent Payment Advisory Board into a “backstop” for his other reforms, making sure that IPAB keeps Medicare cost growth low. But CBO, in its July 2009 letter, said that keeping the board independent enough to actually do what Obama wants it to do – especially after he leaves office – would be difficult and make the Board unlikely to produce any real savings.

“Outside influence on the [board] and the President, however, might make it politically difficult to recommend and implement reforms that could be viewed as undesirable by interested parties.

“Medical providers, beneficiaries, and Members of Congress would probably exert considerable pressure on both (the advisory board) and president to balance recommendations for savings against beneficiaries’ concerns about the costs and availability of medical services and the interests of those receiving Medicare payments for delivering services.”

Elmendorf, in his October 2010 speech, was even blunter, saying it was “unclear” whether any savings would come from increased efficiency – as Obama claims – or from government rationing.

“[I]t is unclear whether such a reduction in the growth rate of spending could be sustained, and if so, whether it would be accomplished through greater efficiencies in the delivery of health care or through reductions in access to care or the quality of care,” he said.

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