With the overheated health care reform proposals being debated in chaotic town-hall meetings, living rooms and around office water coolers, the focus now is on how to pay for congressional proposals that pledge to expand coverage and reduce premiums.

A Congressional Budget Office analysis of America's Affordable Health Choices Act, in conjunction with the Joint Committee on Taxation, put President Obama on the defensive when it concluded that the legislation would actually increase the federal budget deficit $239 billion between 2010 and 2019. House Speaker Nancy Pelosi (D-Calif.) griped that the report fails to consider proposed spending reductions, such as preventive-care measures.

But CBO data also was used as ammunition against Republican opponents of a public plan option when the agency estimated that no more than 10 million Americans would sign up for such coverage, while the Urban Institute pegged the number at 40 million. Both reports were significantly below the Lewin Group's recent conclusion that 119 million citizens would switch from private health insurance if reimbursement rates are similar to Medicare.

Moreover, a recent Commonwealth Fund report noted that an insurance exchange providing a choice of private plans only would increase administrative costs by $32 billion from 2010 to 2020.

As long as Congress adheres to the CBO's conservative legislative "scoring" requirements that emphasize budget-neutral proposals, the reform debate will drag on until the end of the year, predicts Joel Miller, senior vice president for communications and policy research for the National Coalition on Health Care in Washington, D.C., a nonprofit and nonpartisan group.

The thinking is that most savings from any investment in comparative effectiveness research, as well as prevention and wellness, and improving medical outcomes, would be realized more on the back end of a 10-year budget window. But "CBO is not scoring many initiatives that were thought to be revenue enhancers or ways of slowing down health care costs to pay for health care reform," he adds.

Mark McClellan, a senior fellow and director of the Engelberg Center for Health care Reform at the Brookings Institution, surmised during a recent policy briefing on Capitol Hill that lawmakers could create a health care advisory council with "some real binding authority to reduce spending growth if other steps are not working."

Whatever the outcome, a mechanism must be in place "to track progress on revenues raised, savings accrued and coverage extended, so that we know if it's time to correct our path midcourse," Rachel Nuzum, senior policy director for the Commonwealth Fund, told attendees.

While Miller notes that the House has been dead-set against taxing employer-provided health benefits, he says the Senate Finance Committee is contemplating a tax on Cadillac-style plans that could accrue anywhere from $100 billion to $200 billion to help pay for health care reform.

Other possible financing schemes on Miller's radar involve so-called sin taxes on alcohol, soda, sweets, cosmetic surgery or gambling. The Senate Finance Committee, however, has indicated a preference for taxing goods or services that are provided within the health care system. Miller also foresees a reduction in spending on Medicare and other governmental programs to keep the price tag manageable but isn't sure about the extent to which any sacrifices hospitals, insurers and pharmaceutical companies are willing to make will be a part of final legislation.

Other sources of revenue that have received little coverage in the media involve an employer mandate and penalties for noncompliance, says Merrill Matthews, executive director of the Alexandria, Va.-based Council for Affordable Health Insurance, noting how one House proposal suggested that 8% of employee payrolls be earmarked to a public plan or some sort of entity.

"The only reason this thing costs $1 trillion or more is because they're expecting the employers to pick up a huge portion of it," he cautions.

Matthews predicts an uphill battle for President Obama and says a number of compromises must be made to get conservative Blue Dog Democrats on board. "After the August recess and kind of raucous things that have been happening out there, it's not entirely clear to me that they will be able to get it done," he says. "I think they no longer have the momentum, and if anything, the momentum is moving away from them."

Matthews says he's "stunned" by how little the White House knows about health insurance nuances. One such example is a recent comment Obama made within the context of strengthening consumer protections about the need for health insurers to allow individuals to renew a policy that's about to lapse - a provision that's already part of the Health Insurance Portability and Accountability Act of 1996.

Miller warns that Americans are playing Russian Roulette if no action is taken to reform the system. "It shouldn't come as a surprise to anybody looking at this issue that there are going to be upfront costs, but the payoff down the road is going to be incredible and it will compound after that initial 10-year period," he says.