CBO, Health, and the Budget

As I’ve discussed in a series of posts (e.g., here and here), the Congressional Budget Office (CBO) has a pivotal role in the health debate. By telling Congress how potential policy changes would affect the budget, CBO analyses can make or break proposed legislation.

As a result, I think it’s important that participants in the health debate – policymakers, analysts, journalists, and ordinary citizens – understand how CBO approaches health issues. That can sometimes be a challenge, however. As I note in a new paper:

CBO analyses often rely on sophisticated economic modeling and are usually framed in ways that match the specific, sometimes arcane, requirements of the congressional budget process. As a result, the cost estimates and related analyses may sometimes be challenging to understand. The unfortunate result can be confusion about what the scores mean and, equally important, what they do not mean.

That’s not a knock on CBO, which I think does a great job; it’s just the nature of the work.

To help reduce potential confusion, my paper (“Understanding CBO Health Cost Estimates”) discusses how CBO approaches cost estimates and some of the particular issues that arise in health policy. Many of the insights come directly from recent CBO reports (CBO takes transparency seriously), while others are based on my own experiences at CBO.

Here’s the paper’s conclusion:

CBO cost estimates will play a central role in the ongoing debate about health policy. This is appropriate, given the potential cost of some proposals and the overwhelming budget challenges that we face.

It is important to remember, however, that the cost estimates cannot speak for themselves. There is a natural tendency to focus solely on the bottom line–estimated costs added up over the next 10 years–but by itself, a cumulative 10-year cost says little about the merits of particular health policies. One can easily imagine good policies and bad policies that have the same 10-year cost.

Nor do cumulative cost figures say much about the long-run budget impacts of particular policies. Those depend on the long-run trajectory of costs and potential offsets, not just on the impacts in the first 10 years.

To get a handle on those critical issues, policymakers, analysts, and journalists need to dig into the cost estimates, examine their details, understand the limitations of the congressional scoring process, and make good use of all the additional information that the CBO can and does provide.

Thanks to Stuart Butler and Bill Beach for inviting me to write the paper.