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Budgetary Treatment of Proposals to Change the Nation's Health Insurance System 1 (May 2009)

handle is hein.congrec/cbo8351 and id is 1 raw text is: A series of issuze summaries from the Congressional Budget Office MAY 27, 2009 The Budgetary Treatment of Proposals to Change the Nation's Health Insurance System The Congress is currently considering various approaches for instituting major changes in the nation's system of health insurance. Some of those proposals would signifi- cantly expand the federal government's role in that sys- tem, thus raising the question of how such changes might be reflected in the federal budget. This brief describes the approach that the Congressional Budget Office (CBO) will take in judging the appropriate budgetary treatment. I In determining the budgetary treatment of a new pro- gram, CBO considers how similar existing programs appear in the budget and how the basic principles that underlie federal budgeting may apply. The most straight- forward situation is one in which money flows through a federal agency or some entity acting on behalf of a federal agency. In those cases, the cash flows generally appear in the federal budget. But the major changes being contem- plated for the nation's health insurance market are quite different from existing federal programs. Many of those changes would involve a mix of governmental activities and private transactions that have some similarities to other programs but are also different in significant ways. In addition, the scope of the changes and the amounts of money involved are substantial; even if there was a clear parallel in an existing but much smaller program, the budgetary treatment of health care legislation would nevertheless merit careful consideration. In making decisions about budgetary accounting, experts often refer to the 1 967 Report of the Presidenit Commiis- sion on Budget Concepts. That report stated, To work well, the governmental budget process should encompass the full scope of the programs and transactions that are 1. The Congressional Budget Office will estimate the budgetary impact of legislation as it is being considered by the Congress. If legislation is enacted into law, the Administrations Office of Management and Budget will ultimately determine how its effects will be reflected in the federal budget. within the Federal sector and not subject to the economic disciplines of the marketplace. The commission recom- mended that the budget should, as a general rule, be comprehensive of the full range of Federal activities. As the commission noted, however, the boundaries of the federal establishment are sometimes difficult to draw. Common Features of Emerging Proposals Many of the proposals under consideration share some or all of the following features: A mandate on all (or most) individuals to have health insurance coverage providing some specified mini- mum level of benefits. A play-or-pay requirement, whereby some or all firms would have to either offer health insurance to their employees or make a payment to the federal gov- ernment. New subsidies and expanded eligibility for the existing Medicaid program to make coverage more affordable for some individuals and families. New exchanges through which individuals and, in some cases, small employers could purchase health insurance. In some proposals, exchanges are envi- sionied as private online clearinghouses similar to Orbitz or e-health (perhaps authorized or regulated by a federal agency). Under others, they would be much more like governmental entities in that they would be responsible for administering subsidies; for collecting payments for premiums and conveying those funds to insurers; for negotiating with insurers over the benefits offered and the prices charged; and for performing other oversight responsibilities. f

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