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CBO's new scoring policy could affect federal healthcare programs

May 20, 2015

The Congressional Budget Office is under new leadership, and the agency made it clear Tuesday that a different type of economic analysis will be used to study the effects of federal spending policies, particularly those in healthcare.

Most analyses from the CBO use “static scoring,” which looks at the direct economic effects of a law without factoring in how the economy will react longer term. Conversely, “dynamic scoring” incorporates macroeconomic elements. The agency uses dynamic scoring for some, but not all, analyses.

House Republicans adopted a resolution this year that said the CBO must use dynamic scoring in its cost estimates of federal legislation “to the greatest extent practicable.”

“CBO expects to devote considerable attention to further developing its capacity to conduct dynamic analysis in the coming year so that it can effectively carry out the requirements specified in the budget resolution,” Keith Hall, new director of the CBO, told the Senate Budget Committee on Tuesday. Hall took over the CBO in April, replacing Douglas Elmendorf. “The agency anticipates that the form in which the information is provided to the Congress will evolve over time depending on what sort of presentation seems most useful.”

The use of dynamic scoring could affect the spending and revenue projections of the Affordable Care Act, as well as Republican-based replacement plans for the healthcare reform law. Dynamic scoring, favored by Republicans, often supports tax cuts. Republicans have justified cuts to Medicare and Medicaid and repeal of the ACA through macroeconomic studies.

But Democrats have derided dynamic scoring as “voodoo economics” that leads to lower tax revenues and higher national deficits.

The CBO's use of dynamic scoring will be put to heavy use for proposed changes to Medicare, Medicaid and other healthcare programs. Hall told Senate members that even though healthcare spending growth was at a historically low level the past few years, “the government's major healthcare programs will continue to rise substantially relative to the size of the economy.”

“In the coming year, CBO expects to expend a great deal of effort analyzing healthcare spending,” Hall said. “The agency is in the process of analyzing various aspects of the healthcare system and enhancing its analytical capacity to assess the effects of future legislation on that system and on the federal budget.”

Hall asked Congress for three new full-time employees, who would focus on dynamic scoring and “analyzing healthcare issues.” The new staffers would cost $440,000.