Future Congressional Budget Office (CBO) estimates of healthcare legislation, even identical legislation to what CBO has already reviewed, may be vastly different because of the peculiarities of the reconciliation process. Despite the recent failure of healthcare legislation, President Trump has advocated for Republicans to pass a healthcare bill to replace the Affordable Care Act. However, time is running out before the healthcare reconciliation package, which allows Republicans in the Senate to pass a bill with 50 votes, is set to expire at the end of September. With Congress needing to raise the debt ceiling and fund the government, it is unlikely that Republicans could come to an agreement and pass a healthcare bill in that time. As a result, Republicans would have to use a new reconciliation package to pass healthcare reform.
In its estimates, CBO uses an annual baseline of current policy to calculate the impact of proposed legislation. For healthcare, CBO annually updates its baseline of how many people under the Affordable Care Act and current administration policies would be covered by health insurance. Because of the peculiarities of the reconciliation process, CBO has been using the 2016 baseline for healthcare. Depending on the timing of any new reconciliation package to pass healthcare reform, CBO would use either its 2017 or an updated 2018 baseline to estimate the impact of health reform, leading its future estimates to differ from its current estimates.
An explanation of the reconciliation and budget process is necessary to understand why CBO is using the 2016 baseline. Because reconciliation is a budgetary vehicle, it must use the budgetary process. Although rarely followed today, about five months before the beginning of the new fiscal year, Congress is supposed to pass a budget resolution determining how much the government can spend in several broad categories. This would be equivalent to a family determining how much they can spend for the year on broad categories such as food, housing, and transportation. After determining the spending limits, Congress is then supposed to write appropriations that determine how much money each agency can spend. These appropriations may be as specific as specifying how much money an agency can spend on an individual project such as a highway (otherwise known as an “earmark,” which Congress no longer uses). In the family budget analogy, this would be akin to the family determining how much to spend on eating pizza each year. Through this process, CBO uses a baseline established at the beginning of the annual funding process so that all estimates can be uniformly compared.
Because the reconciliation instructions are attached to the annual budget resolution, this caused the odd result of using an old healthcare baseline. Although a budget resolution is intended to be passed in April before a new fiscal year, both Democratic and Republican Congresses have had trouble passing them. The 2017 fiscal year was no different. Even though the fiscal year had already begun, Congress used the budgetary resolution for fiscal year 2017 (2016 baseline) to create the reconciliation instructions for healthcare. Thus, CBO used the 2016 healthcare baseline when calculating the impact of healthcare legislation.
It is not immediately clear what impact using a new baseline for health reform would have. The first question is whether CBO would use the current 2017 baseline or a future 2018 baseline. This would depend on whether Republicans want to use the 2017 budget process for reconciliation instructions for tax reform or healthcare. Additionally, Republicans do not necessarily need to use the reconciliation process to consider healthcare proposals. The House of Representatives could approve a new healthcare proposal with a simple majority vote and Senate committees can approve legislation by a simple majority vote. Thus, Republicans could leave open the possibility of using reconciliation for tax reform while working on a new healthcare bill. Republicans could use the reconciliation process if they are sure that they have the votes to pass any draft legislation. Nevertheless, CBO would still need to score bills passed out of a Senate committee or considered by the House of Representatives, and absent any reconciliation instructions, CBO would likely use the most recent baseline.
If CBO were to use the 2017 instead of 2016 baseline, the estimates might be vastly different. As compared to the 2016 baseline, the 2017 estimates about 1 million fewer people insured per year and about 5 million fewer people per year getting insurance through the exchanges. Republicans have argued that this lower estimate of exchange usage and uninsured population means that their healthcare proposals would have less of an impact and cause fewer people to be uninsured than CBO originally estimated under the 2016 baseline. Although that is a possible conclusion that CBO could reach, using the 2017 baseline might not necessarily be favorable to Republicans. Under Republican proposals, CBO estimated that although fewer people would use the exchanges, the exchanges would still be viable and only a few areas would not have coverage. However, if CBO were to use a baseline with greater than 25% less enrollment on the exchanges, the reduction in exchange users from Republican proposals might lead to the exchanges not having enough critical mass of participants to be viable. Thus, they could collapse, leading to more people being uninsured. Either way, any new CBO estimates of healthcare legislation could be vastly different.
Sam Wice is a former analyst at the Congressional Budget Office and a former Council Member of the American Bar Association’s Section of Administrative Law and Regulatory Practice. He can be reached at sam.wice[at]outlook.com.