CBO Chief Is Health-Care Referee
Peter Orszag Takes
A High Profile
On Crucial Issue
By ANNA WILDE MATHEWS
April 21, 2008; Page A4
As the presidential candidates and Congress rev up the debate over the future of health care, Peter Orszag is already playing one of the toughest positions: referee.
Mr. Orszag, a 39-year-old economist, is the director of the Congressional Budget Office, the influential agency charged with toting up congressional bills' impact on the federal budget. Such scoring can sink bills that can't offset their costs with savings -- a serious risk for proposals that aim to expand federal health programs to cover more citizens.
BIG ROLE
Mr. Orszag increasingly is focusing on health issues, taking an unusually high profile for his nonpartisan office. He has become a prominent speaker at health conferences and co-wrote two pieces in the New England Journal of Medicine. He has launched a blog, cboblog.cbo.gov/, boosted the number of staffers who work on health to 47 from 31 and is seeking to add more. The agency has 235 employees.
"This actually is our fiscal future, and policymakers do not have as much analysis and options as they would need to make sound long-term decisions," says Mr. Orszag.
Mr. Orszag wants to drive home concerns about what he says are the "unsustainable" current growth rates of Medicare and Medicaid. Over his desk hangs a chart showing projected growth in federal spending on the two programs, which together are projected to represent 9% of gross domestic product in 2035 and 19% by 2082. Currently, they constitute 4% of GDP, or nearly $600 billion in federal spending for 2008. The Medicare trustees have said the elderly-insurance program's hospital trust fund is on track to run out in 2019.
Though Mr. Orszag, who worked in the Clinton administration, steers clear of presidential politics, his office could play a key role in the fate of the next president's efforts to re-organize the health-care system. Because of the sharply different approaches of Republican candidate Sen. John McCain and the two Democrats, Sens. Hillary Clinton and Barack Obama, health plans will likely be a significant policy clash in the general election this fall. And the work the CBO is doing now may provide ammunition to one side or the other, as it examines different potential approaches.
The CBO director, who started his four-year term in January 2007, is going beyond the traditional budget-Cassandra role, and analyzing causes and solutions. He has emphasized that the biggest driver of rising medical costs is the increasing use of new technology, not simply an aging population. Mr. Orszag likes to present a slide show that highlights geographic variations in Medicare spending -- which, he points out, don't clearly correlate with healthier people.
"Peter has helped change the focus in health-care-policy debates to the delivery system," says Mark McClellan, who headed the federal agency that oversees Medicare and Medicaid during the Bush administration and is now based at the Brookings Institution.
Mr. Orszag, who didn't focus on health care in his own research at Brookings and elsewhere, says he found "astounding" the gaps in spending between particular hospitals that emerged in Dartmouth Medical School research. "We're paying twice as much at one place as the other and we have absolutely no idea what we're getting in exchange for it," he says.
The CBO has released an analysis on the hot-button topic of "comparative-effectiveness research," which weighs different medical treatments. The analysis generally took a favorable view toward such research as a means of reducing costs. The office is scheduled soon to release an analysis on information technology, likely exploring the evidence for its usefulness and its possible budget effects.
The CBO's health-care work "will be very instructive to members when we attempt to take steps to right the ship," says Sen. Kent Conrad, the North Dakota Democrat who chairs the Senate Budget Committee.
Like all CBO directors, Mr. Orszag gets constant prodding from lawmakers eager to play up their bills' budget savings, and the stakes will be far higher for any major reorganizational legislation. In 1994, then-CBO director Robert Reischauer famously testified that the Clinton health plan would cost the federal government far more than the White House projected, resisting pressure to score it more favorably. The testimony was a serious blow to the plan.
"Because the CBO plays such a critical role...of course what he says will have a big impact," Mr. Reischauer, now president of the Urban Institute, says of Mr. Orszag.
Because many of today's proposals haven't been tried before, it is particularly challenging to model -- and easy to argue -- their likely effects, economists say.
"Effective policies to increase access to health care, and to improve the quality of that care, have far-reaching effects on our economy," says Sen. Edward Kennedy, the Massachusetts Democrat who chairs the Senate health committee. "It's essential for the Congressional Budget Office to take this complexity into account in analyzing health legislation."
Conversely, the office can face second-guessing when it does chalk up some savings. Joseph Antos, a former CBO official who is now at the American Enterprise Institute questioned the CBO's decision to attribute at least some potential offsetting savings to comparative effectiveness.
The upshot was that at the end of a 10-year span, the project would effectively break even. "The great tradition of CBO has been that if there wasn't clear evidence on some proposal, the response was, 'We won't give you a score,' " Mr. Antos says. "The evidence is simply not there, by my reading."
Mr. Orszag says he is seeking to battle perceptions that the CBO doesn't adequately take potential savings into account. He has heard more objections about the CBO being too stingy in its analysis of the comparative-effectiveness provisions, he says.
In general, he says, "we should give our best estimate on either side." His background in an academic family -- son of a Yale math professor; brother of two other Ph.D economists -- prepared him to weather such arguments, he says.
Write to Anna Wilde Mathews at anna.mathews@wsj.com
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