How CBO and JCT Analyze Major Proposals That Would Affect Health Insurance Coverage
The process for analyzing major health care legislation involves three key steps: develop an analytic strategy, model the effects of the proposal, and review and write about the estimate.
CBO and the staff of the Joint Committee on Taxation (JCT) estimate the budgetary effects of most types of major legislative proposals that would affect both spending and revenues using a process that involves many steps and many analysts. This report focuses on the process that the agencies use to analyze proposals affecting health insurance coverage for people under age 65, such as legislation that would make major changes to the Affordable Care Act (ACA).
The undertaking is a joint effort: CBO takes the lead in estimating the changes in coverage, premiums, and federal spending, and JCT takes the lead in estimating the tax-related budgetary effects, including those related to changes in the exclusion for employment-based insurance and premium tax credits provided for coverage obtained in the health insurance marketplaces established under the ACA. (This report does not discuss how the agencies project a proposal’s macroeconomic effects and their budgetary impact.)
The process for analyzing health care legislation has much in common with that used to analyze other types of major proposals. It includes the following steps:
- Develop an analytic strategy. Analysts from the two agencies first review the proposal and identify the key effects it would have. They then examine implementation issues and assess the potential timing of effects. As part of the process of developing an analytic strategy, the agencies consult with outside experts and review existing evidence.
- Model the effects of the proposal. The agencies use several models—including CBO’s health insurance simulation model (HISIM), models of Medicaid enrollment and costs, and JCT’s individual tax model—to analyze the proposal’s effects on health insurance coverage and the federal budget. CBO and JCT translate the features of the proposal into changes, relative to current law, in the price and generosity of health plans and in other factors affecting decisions of all parties involved—states, employers, insurers, individuals, and others—to model the proposal’s effects on health insurance coverage and premiums. The agencies then use the results from those models as building blocks to project the proposal’s budgetary effects—including those on the costs of the Medicaid program and on receipts of individual income taxes.
- Review and write about the estimate. When an estimate of the proposal’s total budgetary effect is nearly complete, CBO and JCT thoroughly review it and write up the results, along with a detailed explanation of how the agencies arrived at them.