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Former Congressman Dr. Phil Gingrey provides public policy and government relations counsel to clients on a variety of issues. Here at Phil on the Hill, Phil draws upon his long career in public service to provide perspective and context on policy topics such as health care, the federal budget, annual appropriations, regulatory reform, and life sciences.

The CBO Score: A User’s Guide

Wednesday, June 07, 2017

As a physician, I often had to distinguish between a medication’s FDA-prescribed purpose and its effectiveness as an off-label treatment. As a Congressman, I had to learn to make a similar distinction between projections from the prescribed formulas of the Congressional Budget Office (CBO) and likely outcomes based on real-world experience.

An agency of the legislative branch, CBO conducts non-partisan analyses of spending and taxing proposals and their expected fiscal and economic impacts. Since 1975, CBO has served as an honorable umpire calling balls and strikes on the economic impact aspects of proposed policy.

Like any umpire, however, CBO is often criticized by one team or the other. Currently, it is House Republicans who are upset with CBO for claiming that the American Health Care Act (AHCA), which passed the House and is now pending in the Senate, will reduce the numbers of Americans with health insurance by 24 million people by 2026.

Many of my former colleagues in the House complain that CBO’s numbers are not reliable, given that a March 2015 CBO report estimated 21 million people would enroll in Affordable Care Act (ACA) exchanges by 2016. According to the Centers for Medicare & Medicaid Services, the actual number was an estimated 12.7 million. With some attrition, the final tally will likely be closer to 10 million.

Tax-cutting, supply-side Republicans also complain that CBO fails to employ an economic term known as dynamic scoring, thus not accounting for the economic stimulus that reduced federal spending and tax cuts could have on growth and enhanced revenues. Dynamic scoring can provide a fuller picture about the long-term economic impact of legislation giving perspective on both costs and savings. CBO already uses some dynamic scoring under certain, specific circumstances and is directed to do so for “major legislation.” While the AHCA apparently met the requirement of “major legislation,” the CBO reported that “because of the limited time available to prepare this [AHCA] cost estimate, quantifying and incorporating those macroeconomic effects have not been practicable.”

Despite this limitation, the static CBO scoring data on the House-passed AHCA still will be helpful for those seeking to understand the possible impact of the Republican plan, especially its treatment of pre-existing conditions, state waivers for coverage categories and other contentious issues. In the thick of this heated debate, we should not forget that congressional intervention is needed — the current system is unstable, with insurance companies pulling out of the ACA exchanges in state after state.

Republican senators have vowed to take a steady, methodical approach to health care, an opportunity to correct shortcomings in the current measure and help repair what is broken in the ACA. Senate rules require a CBO score of legislation before bills can be brought to the floor for consideration. As they do, Senators will want to conduct a careful study of CBO’s numbers, whether static or dynamic, as well as their own off-label assessments of likely real-world implications.