Orszag: Health Reform Savings Could Be More Than CBO Estimated

Yesterday, White House Office of Management and Budget Director Peter Orszag said that the Congressional Budget Office might have underestimated the budget reduction effects of the new health reform law, The Hill reports.

CBO estimated that the overhaul would reduce the federal deficit by $143 billion over its first 10 years and by between 0.25% and 0.5% of the gross domestic product over the second decade, totaling about $1 trillion in savings.

However, Orszag -- a former director of CBO -- said that the deficit impact might turn out to be larger than CBO projections because estimates have historically been conservative. He also said that the scoring did not fully consider a trend toward a quality-based payment structure.

Furthermore, Orszag noted that the Medicare commission created through the law "could prove to be far more important to the future of our fiscal health than, for example, the CBO." CBO in July 2009 estimated that the Medicare commission would reduce the budget deficit by $2 billion this decade and by "tens of billions of dollars after 2019."

Although CBO's figures might underestimate the budget effect, Orszag indicated that in general CBO acted appropriately in its estimate.

CBO Director Douglas Elmendorf this week said he is "very comfortable" with the office's estimates, but he acknowledged that there was "a great deal of uncertainty" in the predictions. He noted that the CBO overestimated the actual cost of 2003 Medicare prescription drug benefit law (Alarkon, The Hill, 4/11).