Noonan falsely claimed CBO said health bill will harm the "economy" during recession

During the July 17 edition of MSNBC's Morning Joe, Wall Street Journal columnist Peggy Noonan falsely claimed, while discussing remarks made by Congressional Budget Office (CBO) director Douglas Elmendorf in July 16 testimony before the Senate Budget Committee, that "Congress' own budget office is saying this is going to have a difficult -- a new health care plan, the one passed by the House -- is gonna have a very bad effect on the American economy at a time that the American economy is already vulnerable." In fact, in the testimony to which Noonan referred, Elmendorf did not discuss the short-term impact of health care reform legislation "on the American economy." Moreover, in testimony later that day, Elmendorf stated that CBO "ha[s] not evaluated the broad economic effects" of the House Democrats' bill.

During the segment with Noonan, Morning Joe aired a graphic providing a portion of Elmendorf's Senate Budget Committee comments with the headline "CBO: Dem Health Plans Weaken Economy":

Contrary to the claim that CBO said the health care plans would "weaken" or "have a very bad effect" on the economy, Elmendorf himself told the House Ways and Means Committee on July 16 that CBO "ha[s] not evaluated the broad economic effects" of the House Democrats' bill. Elmendorf's statement came in response to Rep. Geoff Davis (R-KY), who asked if CBO had calculated "the amount of economic ripple effect that's going to go into a down economy now, as this additional burden gets placed upon employers." Elmendorf further stated that "this proposal would have its principal effect in 2013 and beyond, at which point the CBO and most private forecasters expect that we will be out of the current recession. But there can still be economic effects, to be sure, and they're not something that we incorporated or will incorporate into cost estimates."

During the Senate Budget Committee hearing, Elmendorf appeared before the committee to testify on CBO's "Long-Term Budget Outlook" and was asked by Sen. Kent Conrad (D-ND) if he had seen in the House or Senate health care reform bills "a successful effort being mounted to bend the long-term cost curve." Elmendorf stated that "it is very hard to look out over a very long term and say very accurate things about growth rates," and that when "focus[ing] on the next 10 or 20 years and look[ing] at whether efforts are being made that are bringing costs down or pushing costs up over that period," he concludes that "[i]n the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount."

In testimony later that day before the House Ways and Means Committee, after Elmendorf told Davis "there are substantial efforts in this bill ... to explore ways of changing Medicare payment policies" that could reduce long-term health care costs, Davis asked Elmendorf to clarify the remarks he had made to the Senate Budget Committee. Elmendorf replied in part:

ELMENDORF: The coverage proposals in this legislation would expand federal spending on health care to a significant degree. And in our analysis so far, we don't see other provisions in this legislation reducing federal health spending by a corresponding degree. That's a different question from whether there are efforts, as you said, in this legislation to change Medicare payment policy in a way that would, over time, reduce federal health spending relative to -- that part -- relative with what would otherwise occur. So there are policies in this legislation about accountable care organizations, about readmissions, about bundling, about rewarding primary care physicians, and so on, that cover a range of the areas that experts think should be investigated.

He later added:

ELMENDORF: The -- this legislation, like legislation being considered on the Senate side, adds substantially to federal health spending through the subsidies and expansion of Medicaid that would broaden health insurance coverage. I've been very clear about that. That amount of money is very difficult to offset. That was the basis of my statement that, on balance, this legislation that's being considered looks to us at this point to be raising federal health spending. That's not contradicted by my other statement that there are provisions of this legislation that are pushing on the levers in Medicare that experts think would over time reduce Medicare spending.

In a July 17 blog post, The New Republic's Jonathan Cohn reported that in the headline of an email carrying its initial report on Elmendorf's testimony, The Washington Post similarly claimed, "CBO Chief: Health Reform Measures Weaken Economy."

From Elmendorf's July 16 testimony before the Senate Budget Committee:

Conrad Question:
Dr. Elmendorf, I am going to really put you on the spot because we are in the middle of this health care debate, but it is critically important that we get this right. Everyone has said, virtually everyone, that bending the cost curve over time is critically important and one of the key goals of this entire effort. From what you have seen from the products of the committees that have reported, do you see a successful effort being mounted to bend the long-term cost curve?

Elmendorf Answer:
No, Mr. Chairman. In the legislation that has been reported we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And on the contrary, the legislation significantly expands the federal responsibility for health care costs.

Conrad Question:
So the cost curve in your judgement is being bent, but it is being bent the wrong way. Is that correct?

Elmendorf Answer:
The way I would put it is that the curve is being raised, so there is a justifiable focus on growth rates because of course it is the compounding of growth rates faster than the economy that leads to these unsustainable paths. But it is very hard to look out over a very long term and say very accurate things about growth rates. So most health experts that we talk with focus particularly on what is happening over the next 10 or 20 years, still a pretty long time period for projections, but focus on the next 10 or 20 years and look at whether efforts are being made that are bringing costs down or pushing costs up over that period.

As we wrote in our letter to you and Senator Gregg, the creation of a new subsidy for health insurance, which is a critical part of expanding health insurance coverage in our judgement, would by itself increase the federal responsibility for health care that raises federal spending on health care. It raises the amount of activity that is growing at this unsustainable rate and to offset that there has to be very substantial reductions in other parts of the federal commitment to health care, either on the tax revenue side through changes in the tax exclusion or on the spending side through reforms in Medicare and Medicaid. Certainly reforms of that sort are included in some of the packages, and we are still analyzing the reforms in the House package. Legislation was only released as you know two days ago. But changes we have looked at so far do not represent the fundamental change on the order of magnitude that would be necessary to offset the direct increase in federal health costs from the insurance coverage proposals.

Conrad Question:
And what about the Finance Committee package, as it stands?

Elmendorf Answer:
I can't speak to that Mr. Chairman. We have been working with the Finance Committee and the staff for a number of months on proposals that they have been addressing. But our consultations with them have been confidential because they have not yet released the legislation, and I don't want to speak publicly about that.

Conrad Question:
All right. In terms of those things that are public from other plans, what are the things that are missing that in your judgement prevent a bending of the cost curve in the right way?

Elmendorf Answer:
Bending the cost curve is difficult. As we said in our letter to you, there is a widespread consensus, and you quoted some of this, that a significant share of health spending is not contributing to health. But rooting out that spending without taking away spending that is beneficial to health is not straightforward.

Again, the way I think experts would put it - the money is out there, but it is not going to walk in the government's door by itself. And devising the legislative strategies and the regulatory changes that would generate these changes is not straight forward. But the directions that have widespread support among health analysts include changing the preferential tax treatment of health insurance. We have a subsidy for larger health insurance policies in our tax code, and that like other subsidies encourages more of that activity. Reducing that subsidy would reduce that. And on the other side, changing the way that Medicare pays providers in an effort to encourage a focus on cost effectiveness in health care and not encourage, as a fee for service system tends to, for the delivery of additional services because bills for that will be paid

From Elmendorf's July 17 testimony before the House Ways and Means Committee:

DAVIS: I'm trying to understand, if you calculated Dr. Elmendorf -- Mr. Elmendorf, in the -- your cost estimates the amount of economic ripple effect that's going to go into a down economy now, as this additional burden gets placed upon employers, many of whom already provide health care.

ELMENDORF: So, Congressman, we have not evaluated the broad economic effects of this proposal. We did release an issue brief several days ago about the labor market effects of health care reform for a variety of the sorts of reforms being discussed now. We are, in response to questions from some members of this committee and others, writing some analysis of the labor market effects that might arise from this particular piece of legislation. That would still not get, I think, to as broad a set of topics as you're interested in.

Of course, this proposal would have its principal effect in 2013 and beyond, at which point the CBO and most private forecasters expect that we will be out of the current recession. But there can still be economic effects, to be sure, and they're not something that we incorporated or will incorporate into cost estimates.

[...]

DAVIS: I guess I'd like to ask a question that is of top priority. You are a respected national figure in this area, and we've got to get it right. People are throwing around a lot of emotion and ideas that don't necessarily have process, but as you've looked at this, what limited aspect you've been able to assess.

Everybody across the board says we've got to reduce cost in this and over time, because if we don't, it's going to have failed. From what you've seen of all of the legislative material through your various experience with the committees in both sides of the chamber, or both sides of the Capitol, what -- and what's been reported -- do you see any effort mounted that will actually reduce long-term health care costs?

ELMENDORF: So I think there are substantial efforts in this bill, Congressman, to explore ways of changing Medicare payment policies. The challenge, as CBO has said for some time, is that health experts, although widely united I think in their views about the directions in which health policy should proceed, are much less clear about the specifics. It makes it much more difficult to write down specific proposals that would reliably save significant amounts of money. The number --

DAVIS: Well, perhaps we could back off again and come back to the original question. You know, I go back to -- my concern is simply from a perspective of provision of health care benefits at an equitable level without creating a rationing system. The question is: Do you in fact see, over the long term, that there will be a reduction in health care costs? That seems like a pretty much a yes or no kind of -

ELMENDORF: Well, it's a complicated business.

DAVIS: Well, this morning in the Senate, you told Senator Conrad, "The legislation is being reported. We don't see the sort of fundamental changes that would necessarily reduce the trajectory of federal health spending by a significant amount, and, on the contrary, the legislation significantly expands the federal responsibility for health care costs." You said that this morning, correct?

ELMENDORF: Yes, I did. So let me explain further for you. The coverage proposals in this legislation would expand federal spending on health care to a significant degree. And in our analysis so far, we don't see other provisions in this legislation reducing federal health spending by a corresponding degree. That's a different question from whether there are efforts, as you said, in this legislation to change Medicare payment policy in a way that would, over time, reduce federal health spending relative to -- that part -- relative with what would otherwise occur.

So there are policies in this legislation about accountable care organizations, about readmissions, about bundling, about rewarding primary care physicians, and so on, that cover a range of the areas that experts think should be investigated.

DAVIS: If I could just --

ELMENDORF: It's a different question than what the net effect is --

DAVIS: If I could just close since I see that my time has expired. I guess I would say that, on the Senate side, the truth is that spending is gonna continue to grow, and over here, that we're creating dozens of new agencies that in the plumbing of it all will create more overhead in the long run. We aren't gonna get a precise answer on that. I yield back, Mr. Chairman.

ELMENDORF: Mr. Chairman, may I for a moment? I think that's a big of an unfair characterization of my answer. What I'm saying here is completely consistent with what I said this morning. Let me try one more time, Congressman.

The -- this legislation, like legislation being considered on the Senate side, adds substantially to federal health spending through the subsidies and expansion of Medicaid that would broaden health insurance coverage. I've been very clear about that.

That amount of money is very difficult to offset. That was the basis of my statement that, on balance, this legislation that's being considered looks to us at this point to be raising federal health spending. That's not contradicted by my other statement that there are provisions of this legislation that are pushing on the levers in Medicare that experts think would over time reduce Medicare spending.

From the July 17 edition of MSNBC's Morning Joe:

MIKA BRZEZINSKI (co-host): And as lawmakers debate a sweeping plan for reform to health care, the director of the Congressional Budget Office is warning the effort will only drive the nation further into debt. Let's read the quote here. He says this: "In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount. And, on the contrary, the legislation significantly expands the federal responsibility for health care costs."

Here with us now, columnist for The Wall Street Journal, Peggy Noonan. We've got a piece from the -- what you've written. We'll get to that in a minute -- on the hearings -- for WallStreetJournal.com. But let's talk about this: front page of The Wall Street Journal today and also front page of The Washington Post. It seems like this plan could even now run into some trouble with Democrats given this latest information, could it not?

NOONAN: Absolutely. I think it gives -- the CBO report gives intellectual cover to those who were inclined to have doubts anyway.

BRZEZINSKI: Right.

NOONAN: I think it's pretty devastating, because it's pretty clear. The Congress' own budget office is saying this is going to have a difficult -- a new health care plan, the one passed by the House -- is gonna have a very bad effect on the American economy at a time that the American economy is already vulnerable.

I think that adds to a sort of -- I just sense a public sense out there that there are two problems. One is that everybody knows it's a thousand-page bill and nobody knows what's in it.

BRZEZINSKI: Yeah.

NOONAN: And they assume it's complications and strange stuff and stuff they haven't been told about.