Response to Questions About Health Care Industry Stakeholders' Proposals

June 16, 2009

CBO was asked to review the documents, accompanying a letter to the President, in which a group of health care industry stakeholders describe their commitments to reduce health care costs, strengthen quality, and improve access, with a particular focus on their potential effects on the federal budget and on the cost or savings that might be attributed to legislation.

Today, CBO released a letter in response to these inquiries. The industry documents describe a number of initiatives that may affect the quality and the cost of health care in ways that might be very beneficial but sometimes would not involve the federal government at all. A CBO cost estimate for a legislative proposal must report the savings that would occur as a result of that particular legislation. To the extent that certain practices would be adopted anyway, without legislation, they would not affect the budgetary scoring of a proposal, although they might affect CBOs baseline projections of the costs of federal programs. Therefore, only a subset of the initiatives identified in the letter to the President could result in savings (or costs) that would be relevant for CBOs cost estimates for legislative proposals, but more specific legislative details would be required in order to prepare such estimates.

Private or governmental initiatives that would affect the amount of spending that occurs in the private sector can have a muted effect on the federal budget by bringing about a change in the composition of compensation between tax-excluded health benefits and taxable wages. But often, steps that would improve the efficiency of the health care system would not translate automatically into savings in federal health programs; in many cases, such savings would require specific legislation to reduce or restructure federal payment rates for medical services.