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More Reasons Cost Control Isn't a Fantasy

Republicans are convinced the Affordable Care Act will cost too much because future lawmakers will never let the law's spending cuts take effect. I think the Republicans are wrong, for reasons I detailed on Monday. But even if you don't believe me, there's another reason to think Republicans are too pessimistic about what health care reform will cost.

The reason is the assumptions of the Congressional Budget Office, which makes the official cost projections. Ezra Klein explained this well the other day:

There's uncertainty around cost projections for any bill, and that's even more true for a big piece of legislation with many moving parts like the Affordable Care Act. But whenever I read conservatives talking about the uncertainty involved in these bills, they seem to think it goes in only one direction: Down.
The health-care legislation might save less money than CBO projects. But it also might save more. People like Harvard's David Cutler and CAP's Judy Feder, people who have spent their lives studying health-care policy, think the CBO is far too conservative when it looks at the delivery-system reforms. They may be wrong, but there's certainly as good a case that they're right as there is that employers, in contravention to what CBO expects and what has actually happened in Massachusetts, will start yanking health-care coverage away from employees by the millions. (And, so far, the bill seems to be increasing the number of small businesses offering their workers coverage.) ... CBO works to be in the middle of that uncertainty. The final results could match the more optimistic projections of liberals or the more pessimistic predictions of conservatives. 

To be more specific, the CBO assumes that changes like introducing electronic medical records, encouraging collaborative group practices, and studying the effectiveness of drugs won't significantly reduce health care spending. Cutler, Feder, and others who have studied health care system disagree, in part because they believe the existing studies of such innovations fail to take into account the way they'd interact. For example, encouraging doctors to collaborate might not, by itself, do much to reduce health care spending. But give those doctors electronic medical records and data on drug effectiveness, so they have more information on both their patients and how to treat them, and those doctors might become a lot more efficient.

Or maybe they won't. As Ezra says, there's really no way to be certain. But if it's possible the Affordable Care Act will cost a lot more than we think, it's just as possible that it will cost a lot less.