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Congressional Budget Office's sunny forecast carries big uncertainties

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In Rose Garden remarks, President Obama said his health care reform would be the most significant effort to reduce the deficit since the balanced budget act of the 1990s.

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"I think the CBO is quite right not putting an estimate on these things," said Rudolph G. Penner, a fellow at the Urban Institute and former CBO director. "If you look at things like the spread of medical information, it seems to me you can't even be certain that the research won't tell you that people need more treatments than they get now. If they turn out to offer a lot more savings than I expect, that will be gravy."

But perhaps the biggest risk that could cause the budget impact to diverge from the CBO estimates comes from Congress. The estimates assume that the legislation plays out as written over the coming decade, which would mean reining in the growth of payments to doctors and hospitals and implementing a tax on high-cost health insurance plans.

Those two policies are responsible for bringing in the revenue and cost savings that allow the plan to expand coverage to 32 million more Americans yet, according to the projections, bring down the deficit.

But that falls apart if a future Congress finds the cuts or taxes too painful to handle and overturns them.

There is precedent for that. The alternative minimum tax, for example, is a policy that under law would increasingly affect more middle- and upper-middle-income people and bring the government tens of billions of dollars. But Congress invariably adjusts the tax every year, preventing it from ensnaring those additional American families.

"The risk is that you've put in these things to create higher savings over time, but then when you get there, people say, 'We can't do that,' " said Maya MacGuineas, president of the Committee for a Responsible Federal Budget. "The huge risk is that the constituencies that didn't win their lobbying effort to stop the bill will be there every single day between now and when these things hit, trying to reduce their impact."

Nonetheless, she and other budget experts say that gradual phase-ins, particularly on the tax on expensive insurance plans, might be the best way to minimize the pain and maximize the chance that future Congresses allow them to take effect.

CBO analysts attempt to make forecasts that are symmetrical -- that have a roughly equal chance of being better or worse than expected. And one recent example offers reason for optimism: The Medicare prescription drug benefit was passed in 2003 -- and its costs have come in lower than the CBO forecast.


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