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COST: Phil Who?

October 19, 2009 - 5:25pm

"Phil Ellis may be the most powerful guy you've never heard of in the health-care debate," Lori Montgomery of the Washington Post writes. She's right. We confess that most of us were none too familiar with the guy who sticks the price tag on health reform.

Meet Phil Ellis. He recevied his undergraduate degree from Stanford, a Masters in public policy from Harvard and a Ph.D. in economics from MIT. He used to work for the Treasury Department and at the Department of Health and Human Services. He joined the Congressional Budget Office in 2002 and now heads its health insurance modeling unit.

And boy has he got influence.

The CBO, recognized for its objective analyses, is responsible for determining the impact of health reform on the federal budget. Ellis has the final judgment call, and his estimates already doomed two legislative proposals.

With such heavy weight resting on its shoulders, the CBO is quick to acknowledge that its numbers can only be so accurate. "Everyone in the process -- especially the CBO -- knows that it is very, very difficult to make these estimates and that they're not more than very educated guesses," said Alice Rivlin, who was CBO's founding director in 1975. Ellis has an impressive resume, and the respect of his peers. But, an educated guess is still an educated guess, even with a well-educated guesser.

Montgomery translates Ellis' job into plain language:

Much of what the CBO does is akin to trying to forecast your grocery bill in 10 years. First, it establishes a baseline: Your history of spending $200 a week at Safeway projected into the future with adjustments for inflation and expected demographic trends (i.e., more children, larger pets). Then it factors in proposed policy changes: Say you want to eat only organic and enroll your husband in Jenny Craig. Costs for meat, produce and dairy would go up, but spending on toothpaste and Saran Wrap would be unaffected. Meanwhile, the extra $70 a week for diet food would be partially offset by lower spending on Cheetos and frozen pizza ... But it would have to make some judgment calls: Is it reasonable to assume that Krispy Kremes are off the table? Or is it safer to budget for a dozen doughnuts once a quarter? And even the most careful estimate can be blindsided: What if the baby you projected to arrive in 2012 turns out to be twins in 2010?

At the end of the day, it is impossible to know if John Smith will give up those Krispy Kremes for the next ten years or if you will give birth to just one baby in 2012. Or if the health reform legislation will cost exactly $829 billion and ... 44 cents?

Both Harvard economist David Cutler and senior fellow at the National Opinion Research Center Jon Gabel have criticized the CBO, arguing that they underestimate potential savings in such health care system changes as better disease management and prevention.

"With such consequential decisions on the table, we feel the weight of responsibility to provide the best information that we possibly can," stated Doug Elmendorf, the CBO director. And given the task at hand, they do. And that best information, verified by Phil Ellis, will have a major role in shaping the outcome of President Obama's reform efforts.