The federal budget is on an unsustainable path, primarily because of the rising cost of health care and the aging of the U.S. population.
Health care reform is a central issue in the 111th Congress, driven especially by growing concern about the number of people without insurance coverage and continual increases in cost. As Members of Senate and House work on comprehensive proposals, analyzing them and helping the Congress understand their effects are a top priority for CBO. Recent CBO cost estimates and analyses are described below.
On November 18, CBO and staff of the Joint Committee on Taxation (JCT) worked together to produce an analysis of the Patient Protection and Affordable Care Act, an amendment in the nature of a substitute to H.R. 3590, as proposed by Senate Majority Leader Reid on November 18.
On November 6, CBO and the JCT staff produced an updated analysis of H.R. 3962, the Affordable Health Care for America Act, as introduced on October 29, incorporating the manager's amendment proposed by Representative Dingell on November 3. This estimate supersedes one produced by CBO and JCT on November 5 and reflects the November 6 enactment of H.R. 3548, the Worker, Homeownership, and Business Assistance Act of 2009. (That law and this legislation both include a specific provision to increase revenues; enactment of H.R. 3548 eliminated that increase in revenue in CBO and JCT's estimate for H.R. 3962.)
This analysis differs from a preliminary analysis of H.R. 3962, as introduced, that CBO and JCT staff produced on October 29, for three reasons. First, this analysis incorporates the effects on spending and revenues of the manager's amendment and the recent Congressional action. Second, this analysis reflects Medicare's payment rates for calendar year 2010 and other changes announced in final rules that were posted on the Federal Register's Web site on October 30, 2009. Finally, this analysis incorporates several technical revisions that had a small impact on the estimated budgetary effects of the legislation.
On November 4, CBO and the JCT staff produced a preliminary analysis of an amendment in the nature of a substitute for H.R. 3962 proposed by Republican Leader Boehner. The amendment includes a number of provisions intended to increase the availability and improve the affordability of private health insurance. This analysis reflects the major net budgetary effects of the proposal, but does not represent a comprehensive cost estimate for the amendment for several reasons. The analysis does not take into account all of the proposal's effects on spending for other federal programs or the administrative costs for oversight and implementation. In addition, the analysis addresses the amendment's impact on direct spending and revenues but does not include the potential costs of provisions that would be subject to future appropriations or that would affect programs that are subject to future appropriations.
On November 2, CBO released a letter to Chairman Rangel responding to questions about the subsidies that enrollees would receive for premiums and cost sharing, and the amounts that they would have to pay, on average, if they purchased a relatively low cost plan in the new insurance exchanges that would be established under H.R. 3962 as introduced on October 29. The letter also compares those amounts to comparable ones for the health care reform proposal introduced by the Chairman of the Senate Committee on Finance, as amended by the committee. (That comparison is based on an October 9 update of an analysis that CBO originally sent to Chairman Baucus on September 22 that addressed the Chairman's mark prior to its amendment.)
On October 30, CBO released a letter to Chairman Baucus and others about how health reform proposals being considered by the Congress would affect the federal budget and national spending for health care. Current proposals to reform the health care and health insurance systems would affect the budget and national health care spending in many ways, and those effects can be summarized using a variety of different measures. The letter attempts to clarify the measures being used by CBO in its analyses of such proposals-in particular, the effects of proposals on federal budget deficits and on the magnitude of the federal budgetary commitment to health care.
On October 29, CBO and the JCT staff collaborated to produce a preliminary analysis of H.R. 3962, the Affordable Health Care for Americans Act, as introduced on October 29 by Representative Dingell and others. Among other things, H.R. 3962, as introduced, would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance "exchanges" through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; establish a public plan that would be administered by the Secretary of Health and Human Services; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare's payment rates for most services (relative to the growth rates projected under current law); impose an income tax surcharge on high-income individuals; and make various other changes to the tax code, Medicare, Medicaid, and other programs.
On October 26, CBO released a letter responding to a request from the Ranking Members of the House and Senate Budget Committees for information on the effects of S. 1776, the Medicare Physicians Fairness Act of 2009. Under current law, CBO estimates that Medicare's payment rates for physicians' services will be reduced by about 21 percent in January 2010 and by about 6 percent annually for several subsequent years. S. 1776 would repeal the Sustainable Growth Rate (SGR) formula, which determines the updates to those payment rates, and permanently freeze those rates.
On October 9, CBO released a letter responding to a request from Senator Hatch for an updated analysis of the effects of proposals to limit costs related to medical malpractice ("tort reforms"). The analysis considers both the direct effect that tort reform could have on premiums for medical malpractice insurance, and the indirect effect it could have by reducing the use of diagnostic tests and other healthcare services when providers recommend those services principally to reduce their potential exposure to lawsuits.
On October 7, CBO and the JCT staff produced a preliminary analysis of the Senate Finance Committee Chairman's Mark for the America's Healthy Future Act of 2009, incorporating amendments that were adopted by the committee by October 7. The analysis reflects the specifications posted on the committee's Web site on October 2, corrections posted on October 5, and additional clarifications provided by committee staff through October 6. Among other things, the Chairman's mark, as amended, would establish a mandate for most legal residents of the United States to obtain health insurance; set up insurance exchanges through which certain individuals and families could receive federal subsidies to substantially reduce the cost of purchasing that coverage; significantly expand eligibility for Medicaid; substantially reduce the growth of Medicare's payment rates for most services (relative to the growth rates projected under current law); impose an excise tax on insurance plans with relatively high premiums; and make various other changes to the Medicaid and Medicare programs and the federal tax code.
This analysis is preliminary in large part because the Chairman's mark, as amended, had not been converted into legislative language. Moreover, although the budgetary information shown in the analysis provides a preliminary assessment of the net effects on the federal budget deficit, CBO did not estimate some of the cash flows that would appear in the budget that would net to zero. In addition, federal spending that would be funded by future appropriations is not reflected in the estimates.
On September 22, CBO released a letter responding to questions from the Chairman of the Senate Finance Committee about the subsidies offered through the insurance exchanges and enrollees' payments for that coverage under the specifications provided by the staff of the Finance Committee on September 15, 2009. It also discusses the factors that affect a comparison of those figures to the amounts that individuals and families would pay, on average, for employment-based coverage or individually purchased policies under current law. (On October 9, CBO updated that analysis and released an updated table that reflected amendments to the Chairman's mark made by Members of the Finance Committee.)
On August 7, CBO released a letter responding to questions from Representative Deal, the Ranking Member on the Energy and Commerce Committee's Subcommittee on Health, on how the CBO's budget estimates reflect potential reductions in federal costs from improvements in health that might result from expanded governmental support for preventive medical care and wellness services.
On June 16, CBO released letters to the Chairman and Ranking Member of the Senate Budget Committee about the features of health care reform proposals that would affect federal spending on health care over the long term. The letter examines the budget outlook under current law; the likely budgetary effect of efforts to expand the scope of insurance coverage; the potential for reducing health care spending; the likely impact of specific changes in the health system; and mechanisms for engendering efficiency gains in health care over time.
CBO will continue to work with Members of the Senate and House involved in health care reform to provide estimates of costs and other effects as legislation is developed. You will be able to find those analyses here.
Consisting of acknowledged experts in health care, CBO's panel of health advisers meets periodically to examine research in health policy and to advise the agency on its analyses of health care issues. The panel thus helps to further the reliability, professional quality, and transparency of the agency's work.
Experts from across the agency come together to analyze health care: estimating the budgetary impacts of federal health care programs, preparing studies of health policy issues, and estimating the budgetary and other effects of proposals to alter the health care system. Two units in the Budget Analysis Division focus particularly on estimating the cost of proposed health care legislation and projecting spending for federal health care programs. The Health and Human Resources Division conducts studies of health issues, including Medicare, Medicaid, pharmaceuticals, public health, and private health markets; it also develops models that underlie cost estimates. The National Security Division conducts studies of the health care provided by the Departments of Defense and Veterans Affairs. The Microeconomic Studies Division also analyzes health issues, especially those related to competition or market structure, including most recently prescription drug pricing and research and development in the pharmaceutical industry.
CBO continually seeks health economists, analysts, and research assistants for health-related programs. The agency has also devoted an internship to health policy, which is for graduate students. It may be available on a summer, semester, or year-long basis depending on work needs and students' availability.
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