Drawing the Line on Health Insurance

The fine folks at the Congressional Budget Office have a reputation as the number-crunching, uber-geeks of the Congressional budget process.  And that’s a reputation they wear proudly (and I am proud to wear as an alum).

But some of CBO’s most important decisions involve principles, not numbers.  For example, CBO has to decide when proposed policies should be treated as part of the government — and thus be recorded on the budget for Congressional purposes — and when not.  Many calls are easy: taxes and spending are clearly governmental, hence in the budget.  Many regulations (e.g., minimum wages and environmental rules) are clearly outside; they may create benefits and impose costs just as taxes and spending do, but they still leave most choice and control in private hands.

And then there are the hard cases such as health insurance reform.

Back in the 1990s, CBO decided that President Clinton’s proposed health insurance reforms would move large portions of the health care system into the federal government … and onto the federal budget.  Not surprisingly, that finding strengthened the hand of opponents who were portraying the proposal as a big government expansion.

Health insurance is again on the Congressional agenda, and policymakers want to know how CBO will handle the issue this time around.  To provide some answers, CBO recently released a brief that describes how it would draw the line between government and non-government in evaluating health insurance proposals.  In his blog, Director Doug Elmendorf delivers the money quote:

In CBO’s view, the key consideration is whether a proposal would be making health insurance an essentially governmental program, tightly controlled by the federal government with little choice available to those who offer and buy health insurance—or whether the system would provide significant flexibility in terms of the types, prices, and number of private-sector sellers of insurance available to people. The former—a governmental program—belongs in the federal budget (including all premiums paid by individuals and firms to private insurers), but the latter—a largely private-sector system—does not.