At a House Budget Committee hearing last fall on the Center for Medicare and Medicaid Innovation (CMMI), members of the majority expressed strong criticism of how the Congressional Budget Office (CBO) scores Medicare demonstration projects, continuing a long-running debate over CBO’s methods. Committee Chair Tom Price (R-GA), President-elect Trump’s pick to be Secretary of Health and Human Services, criticized CBO’s admitted inability to predict “which, if any, of the current demonstration projects CMMI has embarked upon will result in savings.”
CBO plays an important role in the policy process. Based on CBO’s estimates of the budgetary impact of a given piece of proposed legislation—that is, whether the bill increases or decreases the federal budget deficit—Congress often decides to go forward with the bill, modify it to get a more favorable ‘score,’ or simply drop it. CBO certainly should (and, in fact, does) work to constantly improve its ability to develop reliable estimates.
But all too often, criticisms of CBO’s methods are motivated by a misunderstanding of what CBO can and cannot be expected to do. As we engage in a new round of health policy debate, it is vital to examine the role of CBO in the legislative process.
Examples of CBO’s Influence
Health policy offers several historical examples of the influence of CBO’s estimates on health policy legislation:
- President Clinton’s health reform proposal, the Health Security Act of 1993, was the subject of extensive debate from the beginning, and CBO’s estimate of its effect on the federal budget played an important role in the debate and the bill’s failure.
- The budget savings enacted in the Balanced Budget Act of 1997 were driven primarily by changes in Medicare payment policy — changes largely driven by CBO’s estimates of their prospective budgetary impact.
- The Medicare Modernization Act of 2003 made prescription drug coverage available to Medicare beneficiaries. President Bush had offered $400 million in his budget to pay for the new benefit, leaving Congress to develop the details of the legislation — with those decisions heavily dependent on CBO’s cost estimates of alternative provisions and the related policy parameters.
- The development of the ACA also depended heavily on CBO’s cost estimates, as President Obama wanted to keep total outlays attributed to the bill below $1 trillion over 10 years and find ways to offset as much of that cost as possible.
Given their importance, debates over CBO’s scores and the methods they use to produce them can be as controversial as the bills that are being considered. In fact, CBO may face criticism from both sides of a particular issue, with opponents of a proposal arguing that its score is too favorable and proponents that it is not favorable enough. But much of this criticism is misplaced, stemming from a tendency by policymakers to misinterpret and misuse the estimates that CBO produces.
Recent Developments
Understanding CBO’s role and the importance of protecting its ability to carry it out is particularly important in light of recent Congressional action. The recently adopted House rules contains a provision that precludes the agency from producing long-term estimates of the budget and coverage impact of repealing or reforming the Affordable Care Act of 2010 (ACA). That provision followed CBO’s announcement that it would define as insurance only “a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals.” Congress has thus placed itself in the position of appearing to prefer no information at all to information that might conflict with its political objectives.
The January 17 release of CBO’s estimate that a previous bill aimed at repealing the ACA would increase the number of uninsured by 32 million and double premiums in the nongroup market by 2026 highlights the importance of CBO’s role, and of the appropriate use of the information it produces.
CBO’s Role
CBO was created by the Congressional Budget and Impoundment Control Act of 1974; among other functions, CBO is required by law to produce a formal cost estimate for nearly every bill that is approved by a full committee of either the House or the Senate, and it produces informal cost estimates for a much larger number of legislative proposals.
With the budget deficit at more than $500 billion and projected to rise steadily over the next decade, Congress is acutely conscious of the budgetary implications of potential legislation, and there is a sense that, if possible, any action that increases federal spending should be offset by an equal amount of spending reduction. (Occasionally, that requirement has been made formal, most recently in the Statutory Pay-As-You-Go Act of 2010, or PAYGO.)
This puts a lot of pressure on CBO and its budget score — and the decisions that it must make to arrive at that score. But informed decision-making involves consideration of multiple factors, which include but are not limited to the budgetary implications of the decision. CBO provides information to Congress on how each bill they might pass affects the federal budget. However, determining the benefit of potential legislation is a much more complicated endeavor, involving diverse and often conflicting preferences and values, as well as expectations about the future that may be determined by events and responses that cannot be foreseen. Still, all too often, Congressional decision-making is driven disproportionately by the CBO score—or, even worse, on purely political grounds—without appropriate consideration of the broader potential impacts, now or in the future, of what is being considered.
CBO’s Methods Aim for the Middle Ground
CBO’s methods reflect its mission to produce “objective, impartial, and nonpartisan analytical judgment,” based on a detailed understanding of federal programs and the tax code; careful reading of the relevant research literature; extensive analysis of data collected and reported by the government’s statistical agencies and by private organizations; and consultation with numerous outside experts. The agency acknowledges that “the evolution of particular federal programs under current law, the budget as a whole, and the U.S. economy is often very uncertain, as are the effects of legislation being considered by the Congress,” but its goal is “to develop estimates that are in the middle of the distribution of possible outcomes and to communicate clearly the basis for those estimates and the uncertainty surrounding them.”
That approach is especially appropriate in evaluating the budgetary impact of bills intended to make incremental policy changes — which covers most cases in which CBO is called upon to produce estimates; for those cases, in fact, a change in CBO’s careful approach would be inappropriate. Occasionally, however, legislation is proposed that is intended to change the very behavioral assumptions on which CBO’s cost estimates are based; in those cases, CBO’s approach—which, by necessity, is methodologically conservative—may not capture the changes that are elicited by that legislation.
The enactment of the Medicare inpatient hospital prospective payment system in the Social Security Amendments of 1983 provides an excellent example of how behavioral change can affect the accuracy of a priori impact estimates. An analysis a few years after enactment found that hospitals did, indeed, change their cost structures in response to financial pressure from the new payment system; that is, rather than allow their costs to increase as projected, they reduced their cost growth — and hospitals that faced the most pressure reduced their cost growth to a greater degree. Projections based on the assumption that cost trends would continue would have indicated higher hospital costs for Medicare and also dire financial trouble for many hospitals, neither of which materialized.
Interpreting CBO’s Estimates
It is extremely important to understand what CBO’s estimates mean, and the circumstances under which they are most and least useful. Although methodology always can be improved, by far the most egregious error regarding CBO’s work is in how it can be misunderstood and misapplied — the tendency to overemphasize seemingly precise cost estimates relative to the many other (but certainly harder to define and quantify) factors that should go into the debate over proposed legislation. The fault is not in CBO’s work, but in how it is too often misinterpreted and misapplied.
The issues discussed in last fall’s Budget Committee hearing and above are very important. How we resolve them will help develop appropriate criteria for determining whether and how demonstrations like those authorized by CMMI should proceed. More broadly, how we think about these issues will determine how we evaluate new health reform proposals — a process that should take into account not only CBO’s cost estimates, but also the potential benefit (or harm) of these proposals to the U.S. health system and the American people. CBO’s estimates are by no means perfect, but the greater problem is the misunderstanding and misapplication of those estimates by Congress — and asking (or enabling) Congress to make decisions in the absence of the information CBO produces is far, far worse.
Author’s Note
The author wrote this piece as a Senior Scholar in Residence at AcademyHealth with generous support from The Commonwealth Fund.
from Health Affairs BlogHealth Affairs Blog http://ift.tt/2jQzF6S
No comments:
Post a Comment