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Reform Proposals Challenge CBO

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The Congressional Budget Office says health reform proposals raise complicated questions about how the federal budget should treat items such as health exchange

Many proposals include provisions that would create an exchange that consumers could use to buy individual or small-group health coverage, and a new “public health insurance” option for working-age adults who are not eligible for Medicare or Medicaid, the CBO says in discussion of budget treatment of health insurance proposals.

When considering treatment of exchanges, for example, “in CBO’s view, the answer partly depends on whether individuals and firms would direct their payments *to exchanges* that in turn would pay insurers, or whether individuals and firms would make their payments via the exchanges to the insurers themselves,” the CBO says. “In the former case, the answer would also depend on whether the exchanges were considered to be federal entities . . . or not.”

Payments to federal entities should be reflected in the federal budget, but payments to insurers, or to exchanges that were not federal entities, should be excluded from the federal budget, the CBO says.

“Exchanges that would be federally operated or administered by third parties acting as agents of the federal government would be deemed federal,” the CBO says. “For example, if proposals specified in detail the duties of exchanges, the kinds of products that could be offered through them, and their oversight responsibilities, then CBO would conclude that the exchanges should be treated as federal even when operated by other parties.”

Even if the proposals delegated the determination of specifications to a federally established board, the exchanges would still be operating as arms of the federal government, the CBO says.

“In contrast,” the CBO says, “if proposals call for exchanges that would simply be clearinghouses to facilitate the purchase of insurance from a variety of private insurers–serving as a marketplace for health insurance plans but not regulating that market themselves–then CBO would not view the exchanges as federal agencies.”

Similarly, treatment of payments for “public health insurance” would depend whether the insurers really were arms of the federal government or private insurers participating in a government-designed system, even if the government required individuals to have health coverage, the CBO says.

A copy of the CBO report is available here.