Ask the Scholar
Document scope · 1 page
Scholar
Ask about this object, its catalog metadata, its source description, or the page inventory.
For page-specific OCR and visual context, open one of the page chats.
Scholar Source Context
Document identity
localId
34429018
label
Office of the First Lady: Baseline
core
doc
dtoType
document
citationUrl
pageCount
1
Source metadata
id
34429018
sourceUrl
contentType
document
title
Office of the First Lady: Baseline
citationUrl
collections
Records of the First Lady's Office (Clinton Administration)
Jennifer Klein's Files
imageCount
1
hasImages
yes
source
import
hasTranscription
no
Source extras
naId
34429018
levelOfDescription
fileUnit
otherTitles
42-t-7422560-20140536S-037-013-2016
recordType
description
ocrSource
nara-archive
Single page context
seq
1
pageIndex
0
type
document
mediaId
54293738d81c566b
ocrText
CBO VS. OMB
Q. THE CONGRESSIONAL BUDGET OFFICE SAYS THAT THE
ADMINISTRATION'S NUMBERS ARE WAY OFF WHEN THEY USE THE CBO
BASELINE. ISN'T THIS JUST ANOTHER ROSY SCENARIO?
A. Absolutely not. We have a solid balanced budget plan based on numbers are
consistent, conservative and professional. Indeed, using the assumptions of the top
private sector forecasters, our plan would get to balance.
There are some small differences between CBO and OMB in growth estimates and the
health care baseline that get magnified over a 10 year period. We believe that our
baseline is superior. Even CBO admits that our growth estimates are more consistent
with the Blue Chip than theirs are. And our health care estimates are done by top,
career health professionals at the Health Care Finance Administration, who have the
best and most current information.
Indeed, CBO acknowledges that the Administration is closer to the Blue Chip than the
CBO on the key economic assumptions that affect the deficit, including growth,
interest rates and the GDP deflator.
Yet, while we believe our baseline is the best and they clearly believe that their
baseline is the best, the key thing is that neither side should let honest accounting
differences be an excuse to not work together to avoid a train wreck and to come up
with the type of balanced budget plan that the American people could support.
FOLLOW UP: BUT DIDN'T YOU PROMISE IN 1993 TO USE CBO PROJECTIONS?
In his first budget, the President wanted to take away any disputes over numbers.
Remember, Administration projections didn't have the best reputation after 12 years of
magic asterisks and smoke and mirrors. Our accurate projections and success on the
budget over the past two years have restored faith in an Administration's ability to put
forward reasonable, fair budget projections. Indeed, we have been more on target than
CBO in projecting the deficit so far. So particularly when the Administration numbers
are exactly in line with the top private sector forecasters, it is appropriate and
necessary for the President to rely on OMB for his budget projections.
BACKGROUND INFORMATION ON THE OMB/CBO BASELINE DIFFERENCES
By our best estimates, using the economic assumptions of the Blue Chip forecasts
and the career professionals at HCFA (Health Care Finance Administration), the
President's economic plan gets to a small surplus in the year 2005.
Indeed, CBO acknowledges that the Administration is closer to the Blue Chip than
the CBO on three key economic assumptions that affect the deficit, including growth,
interest rates and the GDP deflator.
A Federal Reserve Board of Philadelphia study of 59 top economists projected
average real GDP growth of 2.6% over ten years. The Administration has projected
average growth of slightly under 2.5%. Therefore, the Administration's numbers are
somewhat conservative compared to many top private sector economists.
There are differences between the OMB and CBO baselines, but they are based on
very small differences in two areas that appear more significant when they are
extended over a 10 year period.
Indeed, after the House takes into account its economic assumptions based on the
CPI, growth and interest rates, 60% of the baseline differential is already evaporated.
So the baseline difference between the Administration and the House is actually not so
significant.
The record has proved that OMB was more accurate it its deficit forecast than CBO
when it presented the Administration's 1993 economic plan.
GROWTH RATES:
Very Small Differences: We assume growth at slightly under 2.5% over the next several
years. CBO is a little lower, around 2.3%. Yet, with the growth dividend that the House
Budget Committee is taking with its plan -- and we are not -- the difference is virtually non-
existent. CBO stated that "the economic assumptions of the Clinton Administration and the
Congressional Budget Office are similar," and that our assumptions actually lead to more
conservative deficit estimates in the first two years of our forecast.
Consistent with Outside Forecasters: Our proposals are consistent with those of the top
outside forecasters. Our growth forecasts are virtually identical to the Blue Chip between
1997-2001, and indeed, in both 1999 and 2000, the Blue Chip forecasts .4 and .3 higher
growth than the Administration does. Meyer & Associates calls for higher growth than the
Administration in 1999, 2000, 2001 and the same in 2002. DRI is higher than we are for two
years, lower than we are for two years and the same two years. Ray Fair has higher growth
forecasts every year between 1998 and 2001. So it is clear that we have conservative growth
estimates that are consistent with the top private sector forecasters.
Indeed, the April, 1995 CBO document that compares CBO and OMB states that "the
Administration is generally closer than the CBO to the Blue Chip's long-range
projections. The Blue Chip indicates the same average growth over the 1997-2000
period as the Administration and has similar projections for interest rates and the
GDP deflator."
This is Very Different from the Rosy Scenarios of the Past: The Administration's growth
forecast is only about .1% higher than CBO's. This is very different from the rosy scenarios
that characterized Republican Administrations. For example, Stockman's FY1982 budget
predicted growth a whopping 1.3% higher than the CBO. The next year, he came back again
with a budget that predicted growth an average of 1.0% higher on average each year for his
plan. The first two years of the Bush Administration called for budgets with growth rates that
were on average .83% higher every year than the CBO projection. So when you see the
differences of .1% or .2% in the CBO and OMB growth rates, you can see that most years
they are 1/10th to 1/7th the degree of differential that we saw during the Bush/Reagan years.
"Wedge Factor" Differences are Narrow: The CBO indicates the difference between the
estimates for the CPI and the GDP deflator has an important effect on the estimates of the
deficit. This difference is called a "wedge factor." The Administration's estimate of wedge is
similar to the Blue Chip's estimate [assuming that both CBO and the Blue Chip make the
adjustment for re-benchmarking the CPI that CBO has already announced it will do in its
summer update.]
HEALTH CARE:
One of the two main reason for the difference in the CBO and OMB baselines is that
the Administration assumes slightly less growth in Medicare and Medicaid.
We should recall that these numbers come from the same HCFA actuaries that the
Republicans frequently use as authorities when discussing the need to strengthen the
Medicare Trust Fund. Certainly, they could not be questioning their credibility now.
It is important to understand that the Medicare and Medicaid numbers are prepared
by the Office of Actuary in the Health Care Financing Administration. The actuaries
are career professionals who have been doing these same numbers through the last two
Republican Administrations. Any notion that their estimates were affected by anything
other than their professional judgment cannot be justified.
The whole difference comes from the fact that on Medicaid the Administration
projects 9.3% growth and the CBO projects 9.9% and on Medicare the Administration
projects 9.1% growth and CBO projects 9.7%
While we believe these are the differences of honorable career professionals on both
sides, we do believe that our numbers are more accurate.
On Medicaid, the Administration has higher beneficiary growth rates, yet they end
up with slightly higher overall growth assumptions because the Administration's
estimates of per beneficiary costs are lower than CBO's 5.3% and 7.0%. Yet, the
HCFA estimates are based on more up-to-date Social Security numbers regarding
disabled beneficiaries in Medicaid and up-to-date Treasury information on Medicaid
outlays -- which catches current changing trends.
On Medicare, the Administration and CBO baselines for inpatient hospital services
(which represent half of Medicare costs) are virtually identical. The only real
difference is that while both believe the high growth rates in home health and skilled
nursing facility costs will come down, the Administration projects them coming down
somewhat faster.
ADMINISTRATION'S GROWTH NUMBERS VS. BLUE CHIP'S: The chart below
shows that the Administration's projection over five years comes to the same average growth
as the Blue Chip, while the CBO's is somewhat pessimistic relative to the consensus of
private forecasters.
LONG-RANGE FORECASTS OF GDP GROWTH
1997 THROUGH 2001
1997
1998
1999
2000
2001
Blue Chip (March)
2.0
2.3
2.9
2.8
2.4
Administration
2.5
2.5
2.5
2.5
2.4
CBO
2.4
2.3
2.3
2.3
2.3
BACKGROUND INFORMATION ON THE OMB/CBO BASELINE DIFFERENCES
By our best estimates, using the economic assumptions of the Blue Chip forecasts
and the career professionals at HCFA (Health Care Finance Administration), the
President's economic plan gets to a small surplus in the year 2005.
Indeed, CBO acknowledges that the Administration is closer to the Blue Chip than
the CBO on three key economic assumptions that affect the deficit, including growth,
interest rates and the GDP deflator.
A Federal Reserve Board of Philadelphia study of 59 top economists projected
average real GDP growth of 2.6% over ten years. The Administration has projected
average growth of slightly under 2.5%. Therefore, the Administration's numbers are
somewhat conservative compared to many top private sector economists.
There are differences between the OMB and CBO baselines, but they are based on
very small differences in two areas that appear more significant when they are
extended over a 10 year period.
Indeed, after the House takes into account its economic assumptions based on the
CPI, growth and interest rates, 60% of the baseline differential is already evaporated.
So the baseline difference between the Administration and the House is actually not so
significant.
The record has proved that OMB was more accurate it its deficit forecast than CBO
when it presented the Administration's 1993 economic plan.
GROWTH RATES:
Very Small Differences: We assume growth at slightly under 2.5% over the next several
years. CBO is a little lower, around 2.3%. Yet, with the growth dividend that the House
Budget Committee is taking with its plan -- and we are not -- the difference is virtually
non-existent. CBO stated that "the economic assumptions of the Clinton Administration and
the Congressional Budget Office are similar," and that our assumptions actually lead to more
conservative deficit estimates in the first two years of our forecast.
Consistent with Outside Forecasters: Our proposals are consistent with those of the top
outside forecasters. Our growth forecasts are virtually identical to the Blue Chip between
1997-2001, and indeed, in both 1999 and 2000, the Blue Chip forecasts .4 and .3 higher
growth than the Administration does. Meyer & Associates calls for higher growth than the
Administration in 1999, 2000, 2001 and the same in 2002. DRI is higher than we are for two
years, lower than we are for two years and the same two years. Ray Fair has higher growth
forecasts every year between 1998 and 2001. So it is clear that we have conservative growth
estimates that are consistent with the top private sector forecasters.
Indeed, the April, 1995 CBO document that compares CBO and OMB states that "the
Administration is generally closer than the CBO to the Blue Chip's long-range
projections. The Blue Chip indicates the same average growth over the 1997-2000
period as the Administration and has similar projections for interest rates and the
GDP deflator."
This is Very Different from the Rosy Scenarios of the Past: The Administration's growth
forecast is only about .1% higher than CBO's. This is very different from the rosy scenarios
that characterized Republican Administrations. For example, Stockman's FY1982 budget
predicted growth a whopping 1.3% higher than the CBO. The next year, he came back again
with a budget that predicted growth an average of 1.0% higher on average each year for his
plan. All four years of the Bush Administration called for budgets with growth rates that were
on average .75% higher every year than the CBO projection. So when you see the differences
of .1% or .2% in the CBO and OMB growth rates, you can see that most years they are
1/10th to 1/7th the degree of differential that we saw during the Bush/Reagan years.
"Wedge Factor" Differences are Narrow: The CBO indicates the difference between the
estimates for the CPI and the GDP deflator has an important effect on the estimates of the
deficit. This difference is called a "wedge factor." The Administration's estimate of wedge is
similar to the Blue Chip's estimate [assuming that both CBO and the Blue Chip make the
adjustment for re-benchmarking the CPI that CBO has already announced it will do in its
summer update.]
HEALTH CARE:
One of the two main reason for the difference in the CBO and OMB baselines is
that the Administration assumes slightly less growth in Medicare and Medicaid.
We should recall that these numbers come from the same HCFA actuaries that the
Republicans frequently use as authorities when discussing the need to strengthen the
Medicare Trust Fund. Certainly, they could not be questioning their credibility now.
It is important to understand that the Medicare and Medicaid numbers are prepared
by the Office of Actuary in the Health Care Financing Administration. The actuaries
are career professionals who have been doing these same numbers through the last two
Republican Administrations. Any notion that their estimates were affected by anything
other than their professional judgment cannot be justified.
The whole difference comes from the fact that on Medicaid the Administration
projects 9.3% growth and the CBO projects 9.9% and on Medicare the Administration
projects 9.1% growth and CBO projects 9.7%
While we believe these are the differences of honorable career professionals on both
sides, we do believe that our numbers are more accurate.
On Medicaid, the Administration has higher beneficiary growth rates, yet they end
up with slightly higher overall growth assumptions because the Administration's
estimates of per beneficiary costs are lower than CBO's 5.3% and 7.0%. Yet, the
HCFA estimates are based on more up-to-date Social Security numbers regarding
disabled beneficiaries in Medicaid and up=to-date Treasury information on Medicaid
outlays -- which catches current changing trends.
On Medicare, the Administration and CBO baselines for inpatient hospital services
(which represent half of Medicare costs) are virtually identical. The only real
difference is that while both believe the high growth rates in home health and skilled
nursing facility costs will come down, the Administration projects them coming down
somewhat faster.
ADMINISTRATION'S GROWTH NUMBERS VS. BLUE CHIP'S: The chart below
shows that the Administration's projection over five years comes to the same average growth
as the Blue Chip, while the CBO's is somewhat pessimistic relative to the consensus of
private forecasters.
LONG-RANGE FORECASTS OF GDP GROWTH
1997 THROUGH 2001
1997
1998
1999
2000
2001
Blue Chip (March)
2.0
2.3
2.9
2.8
2.4
Administration
2.5
2.5
2.5
25
2.4
CBO
2.4
2.3
2.3
2.3
2.3
LNBS
LETTERS TO THE EDITOR
From the President, a Credible Budget
The editorial "Less Than Straight"
But for some reason, The Post
overstated the problem. and CBO over-
[June 20], challenging the credibility
neglected to mention that the admin-
stated it even more. And if our forecast
of the president's 10-year plan to
istration's economic forecast is closer
is accurate, then CBO has erred by
balance the budget, distorts the facts
than the CBO forecast to the main-
doubling the size of the problem.
in a way I have rarely seen on The
stream of private economic fore-
Also, with regard to health care
Post's editorial page. The president's
casts-as represented not only by the
spending, the administration's projec-
plan is based on solid, conservative
well-known Blue Chip consensus fore-
tions are made by the longtime career
estimates of economic growth and
cast but also by a new survey of
professionals at the Health Care Financ-
health care spending, and there is no
private economists by the Federal
basis for suggesting otherwise.
ing Administration. Their estimates are
Reserve Bank of Philadelphia. The
I can understand the view that no
untouched by political hands. And no-
long-term average annual growth
administration's numbers are to be
forecasts are as follows: Federal Re-
body, including CBO, has access to the
trusted. I too watched the Reagan and
serve survey: 2.6 percent; Blue Chip:
kind of program and other information
Bush administrations cook the books
2.5 percent; OMB: 2.45 percent;
that they do. It is their projections on
for 12 years, basing budgets on fanta-
CBO: 2.3 percent.
which Congress is relying for declaring a
sy forecasts that were wildly more
The Post did get one thing right:
crisis in the Medicare trust fund.
optimistic than those of the Congres-
"No one can know for sure which
If The Post wants to advocate greater
sional Budget Office (CBO).
estimate is right." However, if I were
savings from Medicare, cutting cost-of-
But those days ended on Jan. 20,
"betting the farm," as The Post put it,
living adjustments for Social Security or
1993, when this president took office
and if I wanted to be objective, I
cutting back on tax indexing, it can go
and restored credibility to the Office
might say to myself: "Forget Con-
right ahead. And congressional Republi-
of Management and Budget (OMB).
gress, forget, the administration; what
cans can certainly advocate cuts in edu-
The president's two OMB direc-
do private-sector economists think?"
cation, greater Medicare savings and a
tors-Alice Rivlin and I-have con-
After all, the companies these fore-
tax increase for 14 million working
sistently used conservative estimates
casters work for have a lot to gain
families. We will respectfully disagree.
for this administration's budgets, and
from accurate forecasts-and a lot to
But neither The Post nor Congress
most responsible economists have ac-
lose from inaccurate ones.
has any basis whatsoever for challeng-
knowledged that reality.
The Post claims that we "defined
ing the credibility of the president's
As The Post notes, the CBO fore-
part of the problem away," that we
budget. Let's get this debate back to its
cast and the OMB forecast-which is
"cut the size of the problem in half."
substance-how to balance the budget.
the same one we released in Febru-
Wrong. We based our estimates on
LEON E. PANETTA
ary-are very close to one another.
the most credible assumptions pos-
Chief of Staff
That's one big difference from the
sible. If anything, we were cautious. If
The White House
Reagan-Bush years.
you believe private forecasts, then we
Washington
Big Differences in Health Bills
Never Elected President
In the article "A Nightmare for
I read with interest the June 5
(so that health care providers would
Defense Attorneys" [news story, June
editorial "The Same Old Health Care
have no more bad debt, uncompensat-
8], Manuel Antonio Noriega was de-
Ads." The American Hospital Associa-
ed care, charity care etc.) and by
scribed as "Panamanian president."
tion certainly went after the House
expanding benefits (e.g., pharmaceu-
We would appreciate it if The Post
Democratic bill (Gephardt-Stark), and
tical benefits). We also contained
would correct the gentleman's title to
I understand the Republicans' anger.
costs across the board, using Medi-
that of dictator or strongman.
But please, there are major dif-
care payment methods to gradually
Mr. Noriega, who is in Miami serv-
ferences between last year's House
lower the rate of health care inflation
ing 40 years in prison for crimes relat-
Democratic bill and this year's Re-
to the rate of growth in the gross
ed to narcotics, was never elected
publican budget proposal. The Post's
domestic product.
president of Panama, and his power or
editorial, however, egregiously as-
The current Republican plan takes
authority never came from the people.
serted that they both represent simi-
out almost twice as much (almost
FERNANDO ELETA
lar attempts to contain health care
three times when you add in the
Deputy Chief of Mission
costs. The editorial's discussion of the
Embassy of Panama
Medicaid cuts) and gives nothing back
specifics of different approaches to
Washington
to the system, and by controlling only
reform-"How you do it and how fast
public side spending, permits disrup-
are always going to be sources of
tive cost shifting and therefore cre-
dispute"-belittles the serious conse-
ates access problems for seniors and
quences of cutting too much too fast
the
poor
The
CBO vs. OMB
Q. THE CONGRESSIONAL BUDGET OFFICE SAYS TIIAT THE
ADMINISTRATION'S NUMBERS ARE WAY"OFF WHEN THEY USE THE CBO
BASELINE. ISN'T THIS JUST ANOTHER ROSY SCENARIO?
A. Absolutely not. We have a solid balanced budget plan based on numbers are
consistent, conservative and professional. Indeed, using the assumptions of the top
private sector forecasters, our plan would get to balance.
There are some small differences between CBO and OMB in growth estimates and the
health care baseline that get magnified over a 10 year period. We believe that our
baseline is superior. Even CBO admits that our growth estimates are more consistent
with the Blue Chip than theirs are. And our health care estimates are done by top,
career health professionals at the Health Care Finance Administration, who have the
best and most current information.
Indeed, CBO acknowledges that the Administration is closer to the Blue Chip than the
CBO on the key economic assumptions that affect the deficit, including growth,
interest rates and the GDP deflator.
Yet, while we believe our baseline is the best and they clearly believe that their
baseline is the best, the key thing is that neither side should let honest accounting
differences be an excuse to not work together to avoid a train wreck and to come up
with the type of balanced budget plan that the American people could support.
FOLLOW UP: BUT DIDN'T YOU PROMISE IN 1993 TO USE CBO PROJECTIONS?
In his first budget, the President wanted to take away any disputes over numbers.
Remember, Administration projections didn't have the best reputation after 12 years of
magic asterisks and smoke and mirrors. Our accurate projections and success on the
budget over the past two years have restored faith in an Administration's ability to put
forward reasonable, fair budget projections. Indeed, we have been more on target than
CBO in projecting the deficit so far. So particularly when the Administration numbers
are exactly in line with the top private sector forecasters, It is appropriate and
necessary for the President to rely on OMB for his budget projections.
BACKGROUND INFORMATION ON THE OMB/CBO BASELINE DIFFERENCES
By our best estimates, using the economic assumptions of the Blue Chip forecasts
and the career professionals at HCFA (Health Care Finance Administration), the
President's economic plan gets to a small surplus in the year 2005.
Indeed, CBO acknowledges that the Administration is closer to the Blue Chip than
the CBO on three key economic assumptions that affect the deficit, including growth,
interest rates and the GDP deflator.
A Federal Reserve Board of Philadelphia study of 59 top economists projected
average real GDP growth of 2.6% over ten years. The Administration has projected
average growth of slightly under 2.5%. Therefore, the Administration's numbers are
somewhat conservative compared to many top private sector economists.
There are differences between the OMB and CBO baselines, but they are based on
very small differences in two areas that appear more significant when they are
extended over a 10 year period.
Indeed, after the House takes into account its economic assumptions based on the
CPI, growth and interest rates, 60% of the baseline differential is already evaporated.
So the baseline difference between the Administration and the House is actually not so
significant.
The record has proved that OMB was more accurate it its deficit forecast than CBO
when it presented the Administration's 1993 economic plan.
GROWTH RATES:
Very Small Differences: We assume growth at slightly under 2.5% over the next several
years. CBO is a little lower, around 2.3%. Yet, with the growth dividend that the House
Budget Committee is taking with its plan -- and we are not -- the difference is virtually
non-existent. CBO stated that "the economic assumptions of the Clinton Administration and
the Congressional Budget Office are similar," and that our assumptions actually lead to more
conservative deficit estimates in the first two years of our forecast.
Consistent with Outside Forecasters: Our proposals are consistent with those of the top
outside forecasters. Our growth forecasts are virtually identical to the Blue Chip between
1997-2001, and indeed, in both 1999 and 2000, the Blue Chip forecasts .4 and .3 higher
growth than the Administration does. Meyer & Associates calls for higher growth than the
Administration in 1999, 2000, 2001 and the same in 2002. DRI is higher than we are for two
years, lower than we are for two years and the same two years. Ray Fair has higher growth
forecasts every year between 1998 and 2001. So it is clear that we have conservative growth
estimates that are consistent with the top private sector forecasters.
Indeed, the April, 1995 CBO document that compares CBO and OMB states that "the
Administration is generally closer than the CBO to the Blue Chip's long-range
projections. The Blue Chip indicates the same average growth over the 1997-2000
period as the Administration and has similar projections for interest rates and the
GDP deflator."
This is Very Different from the Rosy Scenarios of the Past: The Administration's growth
forecast is only about .1% higher than CBO's. This is very different from the rosy scenarios
that characterized Republican Administrations. For example, Stockman's FY1982 budget
predicted growth a whopping 1.3% higher than the CBO. The next year, he came back again
with a budget that predicted growth an average of 1.0% higher on average each year for his
plan. All four years of the Bush Administration called for budgets with growth rates that were
on average .75% higher every year than the CBO projection. So when you see the differences
of .1% or .2% in the CBO and OMB growth rates, you can see that most years they are
1/10th to 1/7th the degree of differential that we saw during the Bush/Reagan years.
"Wedge Factor" Differences are Narrow: The CBO indicates the difference between the
estimates for the CPI and the GDP deflator has an important effect on the estimates of the
deficit. This difference is called a "wedge factor." The Administration's estimate of wedge is
similar to the Blue Chip's estimate [assuming that both CBO and the Blue Chip make the
adjustment for re-benchmarking the CPI that CBO has already announced it will do in its
summer update.]
HEALTH CARE:
One of the two main reason for the difference in the CBO and OMB baselines is
that the Administration assumes slightly less growth in Medicare and Medicaid.
We should recall that these numbers come from the same HCFA actuaries that the
Republicans frequently use as authorities when discussing the need to strengthen the
Medicare Trust Fund. Certainly, they could not be questioning their credibility now.
It is important to understand that the Medicare and Medicaid numbers are prepared
by the Office of Actuary in the Health Care Financing Administration. The actuaries
are career professionals who have been doing these same numbers through the last two
Republican Administrations. Any notion that their estimates were affected by anything
other than their professional judgment cannot be justified.
The whole difference comes from the fact that on Medicaid the Administration
projects 9.3% growth and the CBO projects 9.9% and on Medicare the Administration
projects 9.1% growth and CBO projects 9.7%
While we believe these are the differences of honorable career professionals on both
sides, we do believe that our numbers are more accurate.
On Medicaid, the Administration has higher beneficiary growth rates, yet they end
up with slightly higher overall growth assumptions because the Administration's
estimates of per beneficiary costs are lower than CBO's 5.3% and 7.0%. Yet, the
HCFA estimates are based on more up-to-date Social Security numbers regarding
disabled beneficiaries in Medicaid and up=to-date Treasury information on Medicaid
outlays -- which catches current changing trends.
On Medicare, the Administration and CBO baselines for inpatient hospital services
(which represent half of Medicare costs) are virtually identical. The only real
difference is that while both believe the high growth rates in home health and skilled
nursing facility costs will come down, the Administration projects them coming down
somewhat faster.
ADMINISTRATION'S GROWTH NUMBERS VS. BLUE CHIP'S: The chart below
shows that the Administration's projection over five years comes to the same average growth
as the Blue Chip, while the CBO's is somewhat pessimistic relative to the consensus of
private forecasters.
LONG-RANGE FORECASTS OF GDP GROWTH
1997 THROUGH 2001
1997
1998
1999
2000
2001
Blue Chip (March)
2.0
2.3
2.9
2.8
2.4
Administration
2.5
2.5
2.5
25
2.4
CBO
2.4
2.3
2.3
2.3
2.3
Increased Medicare Beneficiary
Out-of-Pocket Costs, 1996 - 2002
$140
$123Billion
$120
$107 Billion
$100
Dollars in Billions
$80
$60
$40
$20
$0
$0
President's Proposal
Senate
House
The new Medicare proposals included in the President's June 14, 1995 budget announcement do not include any new
beneficiary costs. Republican proposals adjusted to reflect the Part B premium extender in the President's FY 1996 budget.
Assumes 50% of Republican cuts affect beneficiaries. US DHHS Estimates
Increased Medicare Out-of-Pocket
Costs Per Beneficiary, 2002
$800
$800
$600
$500
Dollars
$400
$200
$0
$0
President's Proposal
Senate
House
The new Medicare proposals included in the President's June 14, 1995 budget announcement do not include any new
beneficiary costs. Republican proposals adjusted to reflect the Part B premium extender in the President's FY 1996 budget.
Assumes 50% of Republican cuts affect beneficiaries. US DHHS Estimates
Increased Medicare Out-of-Pocket
Costs Per Couple, 2002
$2,000
$1,600
$1,500
Dollars
$1,000
$1,000
$500
$0
$0
President's Proposal
Senate
House
The new Medicare proposals included in the President's June 14, 1995 budget announcement do not include any new
beneficiarycost. Republican proposals adjusted to reflect the Part B premium extender in the President's FY 1996 budget.
Assumes 50% of Republican cuts affect beneficiaries. US DHHS Estimates
Increased Medicare Out-of-Pocket
Costs Per Beneficiary, 1996 - 2002
$4,000
$3,500
$3,000
$3,000
$2,600
$2,500
Dollars
$2,000
$1,500
$1,000
$500
$0
$0
President's Proposal
Senate
House
The new Medicare proposals included in the President's June 14, 1995 budget announcement do not include any new
beneficiary costs. Republican proposals adjusted to reflect the Part B premium extender in the President's FY 1996 budget.
Assumes 50% of Republican cuts affect beneficiaries. US DHHS Estimates
Increased Medicare Out-of-Pocket
Costs Per Couple, 1996 - 2002
$7,000
$5,900
$6,000
$5,200
$5,000
Dollars
$4,000
$3,000
$2,000
$1,000
$0
$0
President's Proposal
Senate
House
The new Medicare proposals included in the President's June 14, 1995 budget announcement do not include any new
beneficiary costs. Republican proposals adjusted to reflect the Part B premium extender in the President's FY 1996 budget.
Assumes 50% of Republican cuts affect beneficiaries. US DHHS Estimates
06/15/95
15:02
002
ID:
JUN 14'95 19:49 No 028 P.02
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
THE
WASHINGTON. D.C. 20503
THE DIRECTOR
June 14, 1995
Honorable Martin Olav Sabo
Committee on Appropriations
U.S. House of Representatives
Washington, D.C. martin 20515
Dear Representative Sabo:
I wanted to follow up on our brief discussion at the Caucus
this morning about the differences between the CBO and OMB
baselines as they relate to Medicare.
Actually, there are two issues here: (1) the historical
difference between the CBO and OMB Medicare baselines in the
aggregate, and (2) the differences between CBQ and OMB scoring of
individual Medicare savings proposals. What I was trying to say
today was that:
the difference in the baselines is independent of any
proposals for Medicare savings, and
one cannot assume that CBO and OMB would score a set of
individual Medicare savings proposals with any significant
deviation.
The numbers in the materials we discussed with the Caucus
today are the most accurate way to compare the President's
Medicare savings proposals with the Republican proposals.
CBO and OMB Baseline Differences
As you know, there have always been differences between the
CBO and OMB Medicare baselines. These differences tend to be
quite narrow in the current year, and grow during the out-years.
As CBO said in its April 1995 analysis of the FY96 President's
Budget, "given the size of [the Medicare and Medicaid) programs
and the uncertainty about their future costs, the projections of
CBO and the Administration are not very far apart."
Over the period from 1996-2002, we estimate that the total
difference between the CBO and OMB Medicare benefits baselines is
about $70 billion. For FY96, C80's estimate of Medicare spending
is only about $4 billion higher than OMB, but this difference
grows in succeeding years; in 2002, the difference is $18
billion.
OMB's Medicare baseline projections are calculated by the
HCFA actuaries, who use the Administration's economic
assumptions. The projections for FY96 reduced projected Medicare
06/15/95
15:02
003
ID:
JUN 14'95
19:50 No.028 P.US
spending by $40 billion over the 1996-2000 period that the
President's Budget covers. We expect spending in the Medicare
program over this time to increase at a slower rate than in
recent years.
This projected slowdown is the result of several factors.
In particular, Hospital Insurance (HI) expenditures have grown
more slowly than we expected at the time WE put together the
budget for FY95. slower HI growth results primarily from a fall
in forecasted hospital cost inflation and the slower growth in
complexity of Medicare inpatient cases.
CBO's projections indicate that it shares our view that
Medicare spending will rise at a slower rate over the next five
years, although CBO does not expect the reduction to be quite as
significant.
CBO forecasts 9.7% average annual growth in baseline
outlays, while OMB forecasts 9.1% average annual growth, for a
cumulative difference of $40 billion over the 1996-2000 period.
CBO's January 1995 Economic and Budget Outlook indicates that CBO
is less optimistic about the slowdown in Medicare spending
because it estimates that the apparent slowing in the growth of
payments for hospitalizations and physician visits is roughly
offset by fast-growing costs for care in other settings,
particularly for home health care and skilled nursing facilities.
CBO vs. OMB scoring of Medicare Savings Proposals
Determining how CBO would score the President's Medicare
savings proposale is an almost impossible task. Although it
might seem that one could simply figure out the percentage by
which the CBO baseline is higher than the OMB baseline, and
multiply the total of our savings proposals by that amount, that
calculation would not be accurate. In fact, our analysts -- and
HCFA's professional Medicare actuaries -- tell me that it might
not even be in the ballpark.
The reason is that the CBO baseline is not a monolithic
stream of numbers; rather, it is composed of many separate
baselines for different services and providers. Thus, for
example, a proposal affecting clinical laboratories would have to
be scored against the clinical laboratories baseline, which might
be lower than the OMB baseline for the same service, even though
in the aggregate, CBO's baseline is higher. Thus, scoring of
specific savings proposals would really have to be done by cBo,
proposal by proposal using detailed specifications, against the
appropriate baseline.
I understand your concern about the uncertainty and
complexity that baseline differences introduce into the scoring
of Medicare savings proposals. Unfortunately, we can do nothing
about these baseline differences; the good news is that recent
06/15/95
15:03
004
ID:
JUN 14'95 19:51 NO.028 P.U4
history reflects that they are not that important when it comes
to scoring specific savings proposals.
Let me mention two examples:
First, you will recall that the Health Security Act
contained Medicare savings proposals that we estimated would
save $118.3 billion over the 1995-2000 period. CBO scored
these same proposals as saving $117.6 on its baseline, which
was higher than ours.
Second, and most recently, our FY96 budget contained four
Medicare "extenders" from OBRA93 that we estimated would
save $28 billion over the 1995-2000 period. CBO has since
scored these same proposals as saving only slightly more,
$30 billion.
I hope this letter has answered some of your questions about
our health reform proposal. Your support is critical as we work
with the Congress to achieve what we both want: a balanced budget
that is fair and reasonable. I look forward to working with you
in the coming weeks.
Sincerely,
COin
Alice M. Rivlin
Director
Hope thas helps.
06/20/95
10:38
202 401 7321
HHS ASPE/HP
002/003
DRAFT,
CBO AND ADMINISTRATION MEDICAID ESTIMATES
QUESTION: Wouldn't the Administration's estimates of Medicaid savings be significantly
different under the CBO scoring?
ANSWER:
The Administration is committed to savings of $55 billion in Medicaid over the
seven year period These savings may be achieved through a mix of policies
including increased state flexibility, limits on the growth in spending per
recipient, and reductions and retargetting of Disproportionate Share (DSH)
payments. We will work with the Congress, the States and the relevant
constituencies to determine the mix of policies so this target may be achieved
under a CBO baseline.
BACKGROUND:
Would a specific Medicaid policy have different scoring under the CBO baseline?
Not necessarily. There are two issues that determine the similarity of the
Administration and CBO scoring: (1) the differences between the baselines, and
(2) differences between the Administration and CBO assumptions about
individual Medicaid savings proposals. Similarities between estimates occur
when the specific policy relates to an area where there CBO and the
Administration agree on either the baseline or the assumptions used in scoring.
1. Differences in the Baselines (Projections of spending under current law):
Projected Medicaid spending is lower than last year's projections under both the
Administration and the CBO's Medicaid baselines. This results from slower
inflation and health care inflation, slowdowns in recipient growth, and the
reigning in of the disproportionate share (DSH) spending.
Although both CBO and the Administration have lowered their baselines, the
Administration estimates that the general slowdown will continue, while CBO is
less conservative. Between 1996 and 2000, the Administration estimates that
Medicaid spending will be $38 billion or 7% lower than CBO's estimates over the
period. The additional difference reflects the Administration's response to several
trends:
Lower economic assumptions, which are reflected in lower cost growth
per recipient (5.2% per recipient under the Administration baseline, versus
7.0% per recipient under the CBO baseline).
Lower long-term care projections: the CBO has considerably higher
growth estimates for long-term care (9.9% under CBO, versus 8.0% under
the Administration baseline). This difference remains even after
accounting for recipient growth.
06/20/95
10:39
202 401 7321
HHS ASPE/HP
003/003
The differences in the baselines are most pronounced in these areas, but are less
important in others. Thus, if proposals are concentrated in areas where there are
similarities in the baselines, then the baseline differences are irrelevant.
2. Differences in Scoring Savings Proposals
Although differences in baselines can affect the scoring of a particular proposal,
the Administration and CBO assumptions about a particular policy also have a
significant effect. This is particularly the case in Medicaid, which is essentially
56 different program. Predicting State behavior is an important part of scoring
these proposals.
06/16/95
10:07
002
CBO and OMB Medicare Baseline Differences
There are really two separate issues here: (1) the
historical difference between the CBO and OMB Medicare
baselines, and (2) the differences between CBO and OMB
scoring of individual Medicare savings proposals.
The difference in the baselines is independent of any
proposals for Medicare savings, and
One cannot assume from this that CBO and OMB would
score a set of individual Medicare savings proposals
with any significant deviation.
1. Differences in the Baselines
There have always been differences between the CBO and OMB
Medicare baselines. These differences tend to be quite
narrow in the current year, and grow during the out-years.
As CBO said in its April 1995 analysis of the FY96
President's Budget, "given the size of [the Medicare and
Medicaid] programs and the uncertainty about their future
costs, the projections of CBO and the Administration are not
very far apart."
For FY96, CBO's estimate of Medicare spending is only
about $4 billion higher than OMB, but this difference
grows in succeeding years; in 2002, the difference is
$18 billion.
over the period from 1996-2002, we estimate that the
total difference between the CBO and OMB Medicare
benefits baselines is about $70 billion.
OMB's Medicare baseline projections are calculated by the
HCFA actuaries, who use the Administration's economic
assumptions. For FY96, the actuaries reduced projected
Medicare spending by $40 billion over the 1996-2000 period
that the President's Budget covers.
The actuaries expect spending in the Medicare program
over this time to increase at a slower rate than in
recent years.
This projected slowdown is the result of several
factors. In particular, Hospital Insurance (HI)
expenditures have grown more slowly than expected.
06/16/95
10:07
003
Slower HI growth results primarily from lower hospital
cost inflation and slower growth in complexity of
Medicare inpatient cases.
CBO's projections indicate that it agrees that Medicare
spending will rise at a slower rate over the next five
years, although CBO does not expect the reduction to be
quite as significant.
CBO's January 1995 Economic and Budget Outlook
indicates that CBO is less optimistic about the
slowdown in Medicare spending because of its view that
the apparent slowing in the growth of payments for
hospitalizations and physician visits is roughly offset
by fast-growing costs, other services such as home
health care and skilled nursing facilities.
2.
Differences in "Scoring" Savings Proposals
Determining how CBO would score the President's Medicare
savings proposals is an almost impossible task. While it
might seem that one could simply figure out the percentage
by which the CBO baseline is higher than the OMB baseline,
and multiply the total of the savings proposals by that
amount, that calculation would not be even close to
accurate.
The reason is that the CBO baseline is composed of many
separate baselines for different services and
providers.
Thus, scoring of specific savings proposals would
really have to be done by cBo, proposal by proposal
using detailed specifications, against the appropriate
baseline.
Recent history reflects that these baseline differences are
not that important when it comes to scoring specific savings
proposals. For example:
The Health Security Act contained Medicare savings
proposals that OMB estimated would save $118.3 billion
over the 1995-2000 period. CBO scored these same
proposals as saving $117.6 on its baseline, which was
higher than ours.
The President's FY96 budget contained four Medicare
"extenders" from OBRA93 that OMB estimated would save
$28 billion over the 1995-2000 period. CBO has since
scored these same proposals as saving only slightly
more, $30 billion.