White House: CBO 'overstepped' in its analysis

[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2009/images/07/26/art.orszag0726file.cnn.jpg caption="White House Budget Director Peter Orszag fired back Saturday at an estimate from the Congressional Budget Office."]
WASHINGTON (CNN) - The White House has criticized the Congressional Budget Office's findings that the Obama administration's proposal to control Medicare costs would yield a moderate savings of $2 billion over the next decade.

White House Budget Director Peter Orszag said the CBO's analysis - which it relayed to House Majority Leader Steny Hoyer on Saturday - could feed a perception of the office's bias toward "exaggerating costs and underestimating savings."

"The point of the proposal ... was never to generate savings over the next decade," Orszag said in a letter posted on Saturday.

"Instead the goal is to provide a mechanism for improving quality of care for beneficiaries and reducing costs over the long term."

CBO Director Doug Elmendorf's letter to Hoyer on Saturday was in response to the Senate Majority Leader's request for analysis on "possible approaches for giving the President broad authority to make changes in the Medicare program," Elmendorf wrote.

The Obama administration is touting a proposal to give a medical advisory council the power to help decide the scope of coverage that would be eligible for reimbursement under Medicare.

Administration officials say the proposed "Independent Medicare Advisory Council" would both improve health care quality and control costs. Some health care industry groups object to the proposal, saying such a council would not be qualified to make those judgments.

The CBO's review of the proposal found that "the probability is high that no savings would be realized … but there is also a chance that substantial savings might be realized," Elmendorf wrote.

"Looking beyond the 10-year-budget window, CBO expects that this proposal would generate larger but still modest savings on the same probabilistic basis."

Orszag, a former director of the CBO, pointed out that "it is very rare for CBO to conclude that a specific legislative proposal would generate significant long-term savings so it is noteworthy that, with some modifications, CBO reached such a conclusion with regard to the IMAC (Independent Medicare Advisory Council concept."

But he also criticized Elmendorf's findings.

"As a former CBO director, I can attest that CBO is sometimes accused of a bias toward exaggerating costs and underestimating savings. Unfortunately, parts of today's analysis from CBO could feed that perception," Orszag said.

"In providing a quantitative estimate of long-term effects without any analytical basis for doing so, CBO seems to have overstepped."

The new council, if approved, would replace the current Medicare Payment Advisory Commission, which is made up of doctors and health care experts. Once a year, it gives recommendations about coverage and reimbursement rates for Medicare but has no authority to enforce its ideas. Its report in March recommended that payments for primary care physicians be increased and home health services rates be decreased.

The proposed council would be comprised of doctors and health care experts making their recommendations based on extensive data and analysis of best health care practices, according to administration officials.

It would be an independent executive branch agency - which would give its recommendations more weight. The president would have to approve or disapprove the its recommendations as a package. If it is approved, the package would be enacted if Congress did not vote against it within 30 days.

Proponents believe this would improve care and help eliminate some of the wasteful spending by doctors who are now paid separately for each visit and procedure they authorize. Instead, this council could recommend, for example, a comprehensive approach to treat a patient with chronic heart condition or high
cholesterol.

The administration says that by encouraging doctors to follow this type of plan, the government will save money by cutting out unnecessary treatments and procedures. The council's recommendations would then go to the commission overseeing Medicare to determine the specific procedures and the actual reimbursement amount.

"It is not an exercise in just cutting reimbursement rates. In fact, in some cases, we may need higher reimbursement rates for certain aspects," President Barack Obama explained at a town hall meeting in Shaker Heights, Ohio, on Thursday.

The members of the proposed Independent Medicare Advisory Council would study different procedures done nationwide to determine what are the best treatments being given in order to determine their recommendations.

Administration officials, though, say this council will not make decisions about what coverage a patient gets.

Still, opponents view this proposal as "big brother" dictating medical treatment.

The conservative Heritage Foundation describes the initiative as being "the equivalent of a federal health board determining how health care was rationed for all seniors."

–CNN's Kevin Bohn, Jessica Yellin, and Ed Henry contributed to this report.