CBO—the health care bill 'scorekeeper'—explained

Topics: Health Care Reform, Finance, Costs and Prices, Politics and Policy, Federal Government

Sam Bernstein, Senior Staff Writer

House Republicans on Thursday voted 217-213 to approve the Republican plan to repeal and replace the Affordable Care Act—the final vote was expected to be close in part because some moderate Republicans were not convinced the latest amendment would provide enough funding to cover the costs of affected individuals with pre-existing conditions.

Why the uncertainty? Rep. Fred Upton (R-Mich.)—author of the latest amendment, which adds $8 billion in funds to reduce health costs for people with pre-existing medical conditions—said it would be impossible to tell if the funding is sufficient without a Congressional Budget Office's (CBO) "score."

A CBO score of an earlier draft of the legislation projected it would increase the number of uninsured Americans by 24 million over a decade, and Democrats are voicing strong opposition to House Republicans' decision to vote on their measure without an updated score.

But just what is CBO, and why do lawmakers care about its scores so much? Here are key questions and answers about Congress' so-called "scorekeeper."

What does CBO actually do?

CBO projects the likely consequences of major pieces of legislation by looking at their text, economic forecasts, and behavioral modeling. For instance, it estimates bills' effects on the budget and other relevant measures, such as insurance coverage.

Any CBO analysis starts with a close reading of the legislation being scored. CBO's experts then try to model a bill's future effects by reviewing data collected by federal statistical agencies and private organizations. The agency also consults with outside experts from academia, think tanks, the private sector, the federal government, and state and local governments.

When CBO projects a bill's effects into the future, it generally assumes there will be no further changes to existing laws or the bill under consideration. Moreover, it bases its projections on a set of predicted economic indicators such as GDP growth and inflation. Deviations from those economic assumptions can have a major effect on whether CBO's scores wind up resembling reality.

What did CBO already say about the House GOP plan to replace the ACA?

CBO in March released a controversial score of an earlier draft of the bill—called the American Health Care Act (AHCA)—finding that the legislation in part would:

  • Increase the number of uninsured Americans by 24 million by 2026, including 14 million in 2018 alone;
  • Decrease federal funding for Medicaid by 25 percent by 2026; and
  • Reduce federal budget deficits by $337 billion between 2017 and 2026.

But CBO has not yet released a new score to take into account the numerous changes to the AHCA since it was pulled from the House floor. Those changes include:

  • a so-called "manager's amendment," which includes a $75 billion fund to make health care more affordable for older Americans and a provision to encourage Medicaid work requirements;
  • An amendment by Reps. Tom MacArthur (R-N.J.), co-chair of the moderate Tuesday Group, and Mark Meadows (R-N.C.), chair of the conservative House Freedom Caucus, that would allow states to apply for waivers to opt out of the ACA's essential health benefits, let insurers impose health status underwriting on individuals who do not maintain continuous coverage, and allow insurers to charge older enrollees more for coverage; and
  • An amendment by Rep. Fred Upton (R-Mich.) that adds $8 billion in funds to reduce health costs for people with pre-existing medical conditions.

How are lawmakers and the White House reacting to CBO's score?

Some Republican lawmakers and members of the Trump administration say CBO's estimates are not reliable. In March, before CBO released its score of the AHCA, White House press secretary Sean Spicer said, "If you're looking at the CBO for accuracy, you're looking in the wrong place. He added,"[CBO was] way, way off last time in terms of how they scored and projected Obamacare."

And after the score's release, HHS Secretary Tom Price said CBO "didn't look at the regulatory reforms that we're going to put into place. It didn't look at the state innovation grants. It didn't look at the flexibility that we're going to allow the states."

But CBO's initial score gave some Republican and Democratic lawmakers pause about supporting the AHCA. Sen. Susan Collins (R-Maine) said the report was "cause for alarm" and "should prompt the House to slow down and reconsider certain provisions of the bill." And Senate Minority Leader Chuck Schumer (D-N.Y.) said, "The CBO score shows just how empty [President Trump's] promises, that everyone will be covered and costs will go down, have been."

So how accurate were CBO's original coverage estimates for the ACA, anyway?

Seven years later, the CBO's March 2010 projections for ACA coverage can be considered either reasonably accurate or completely off the mark, depending on your perspective.

In terms of total coverage, CBO was off by a bit. It projected that there would be 26 million uninsured nonelderly Americans in 2015; according to the Kaiser Family Foundation's analysis of Census data, there were about 28.5 million uninsured nonelderly Americans that year.

However, as you can see from the chart below, CBO was off substantially in terms of how people gained coverage—expecting many more people to gain coverage from the exchanges and many fewer from Medicaid and CHIP.

How CBO's March 2010 projection held up, by coverage type

Brian Blase, a senior fellow at George Mason University's Mercatus Center, said CBO overestimated exchange enrollment in part because the agency overestimated how effective the individual mandate would be at getting "relatively healthy people with middle class income to buy coverage in the exchanges."

As for CBO's underestimate of Medicaid and CHIP enrollment, recent research by MIT economist Jonathan Gruber suggested that a significant number of people enrolled in Medicaid after the ACA who already had been eligible under pre-ACA rules—an effect that CBO did not entirely anticipate. Joan Alker, a research professor at Georgetown University, credited the "welcome mat effect" for enticing previously eligible people to enroll in Medicaid. "There was a lot of outreach and publicity, and people started coming in," she explained.

CBO's projections also did not account for the Supreme Court's 2012 decision in National Federation of Independent Business v. Sebelius, which made the ACA's Medicaid expansion optional. According to an analysis by the Kaiser Family Foundation, several million more adults would have been eligible for Medicaid coverage if every state had expanded the program. Notably, this suggests CBO underestimated the consequences for Medicaid enrollment of the ACA as written by an even larger amount than current coverage data suggest.

How seriously should lawmakers and the public take CBO's estimates?

Most experts agree that CBO scores are an extremely important part of the legislative process. But they are also not perfectly accurate. Republicans are correct to point this out—but that leaves lawmakers facing a tough question: If they don't trust CBO, how can they anticipate the effects of their own proposals?

Nearly every long-term economic forecast involves significant uncertainty. But policymakers also need some sort of analysis to help them make decisions.  And while CBO's ACA projections were off in some areas, a 2015 analysis by the Commonwealth Fund suggests they were more accurate than several other forecasts by independent experts.

Robert Reischauer, who directed the CBO from 1989 to 1995, put it well when he recently told NBC News that CBO was both imperfect and essential. "Would I bet my dog's life on (the CBO score)? No," he said. "But do I think it's a very solid estimate? Yes, if I had to make policy."