WASHINGTON - The debate over whether to hold down health carecosts with free markets or price controls rages on. But some lawmakershave begun to suspect that the Congressional Budget Office (CBO) istaking sides.At a Progressive Policy Institute (PPI) forum here on Wednesday, Rep.Jim Cooper (D-Tenn.) complained that models used by the CBO toassess the economic impact of competing health care plans favor thosewith heavy government regulation. He said the CBO consistentlyexaggerates the potential savings of price controls and underestimatesthe savings of managed competition.CBO scores are critical to getting legislation passed because budgetlaws require that new bills be deficit-neutral. A negative CBO scorecan inflict heavy political damage.Cooper, who introduced managed competition legislation earlier thisyear (HR 3222, "The Managed Competition Act"), said that CBO hasdifficulty scoring market-based approaches due to the many complexvariables in the marketplace. "CBO rules give the benefit of the doubtto big government approaches," Cooper said.However, earlier this year the CBO ruled that Clinton's plan would add$74 billion to the federal deficit in its first six years of operation.Cooper said that the CBO will score a revised version of his plan soonbut he appeared to be expecting the worst by launching a preemptivestrike on the agency's methodology.Lawmakers and policy analysts at the PPI forum routinely invoked"managed competition" as the cure for the nation's costly medical bills.The problem is how you define managed competition. Clintonadministration officials insist that the President's bill relies primarilyon market forces and managed competition, with a few "backstops" tocontain costs (such as global spending caps, premium caps andbreakthrough drug committees) thrown in for good measure.Critics of the Clinton plan say that his bill and others of its ilk betray adeep distrust of the marketplace and unwarranted faith in governmentbureaucracies. The outcome of this debate will have profoundconsequences for the nation's health care system and for biotechnologycompanies who seek to participate in it.Sen. John Chafee (R-R.I.), a senior member on the Senate FinanceCommittee, criticized the Clinton proposal for imposing global caps onhealth care spending. He also singled out the idea of a breakthroughdrug committee for censure. "The capacity to suggest new drug pricesis a very, very powerful tool in the hands of a political appointee whoobviously is going to try to get the prices of new drugs way, waydown," said Chafee.Alain Enthoven, a professor at the Graduate School of Business atStanford University, said that competitive markets give suppliers amaximum incentive to produce value for money and price controlsintroduce "perverse incentives" into the system. "The entire world'seconomic history and experience argue that markets work best, thatincentives are preferable to coercion," he said.Enthoven called CBO scoring "strictly Alice-in-Wonderland" andcounseled legislators and the public to rely on common sense instead."Price controls represent the `flat earth' theory of economics," he said."Even the Russians are trying to create a market-based system."The lone supporter of Clinton's plan at Wednesday's meeting was RuthFeder, principal deputy assistant secretary for planning and evaluationat the Department of Health and Human Services. She arguedrepeatedly that the health care marketplace needs an overhaul. "Themarket does work but it needs a backup system," she said. Proponentsof tinkering with the market argue that while it may function efficientlyover the long haul, it usually fails to address issues of social justice. Forexample, it has failed to provide medical insurance coverage for thepoor in the U.S.Even if price controls, in the form of global spending caps andpremium caps, make it into the final legislation, some expressed doubtthat Congress would enforce them since many believe that enforcementof caps will be tantamount to rationing. And health care rationing isseen as political suicide."Price controls depend on all-wise bureaucrats and all-courageouspoliticians," said Cooper. "The U.S. Congress won't back up pricecontrols or the rationing of American health care when it comes downto it."
-- By Lisa Piercey Washington Editor
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