By Julius W. Hobson
January 16, 2015 at 5:00 am ET
On the first day of the new Congress, the House adopted it rules for the 114th Congress. H. Res. 5 passed by a vote of 234 to 172. No Democrats voted for the rules change.
The resolution contained a provision requiring “dynamic scoring” of “major legislation” by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT). Major legislation is defined as any bill that causes a gross budgetary effect in any fiscal year “equal to or greater than 0.25 percent of the current projected gross domestic product of the United States for that fiscal year…” The bill also allows the Budget Committee Chair to designate a bill as major legislation. Inherent in this rules change is a temptation to designate what is a “major bill” depending on a scoring outcome.
The first question is what is dynamic scoring? Second, what is static scoring and why is it different? Third, how could this possibly affect health care legislation?
Dynamic scoring attempts to estimate the effects of proposed policy changes on macroeconomic variables such as gross domestic product (GDP), inflation, interest rates, and employment. It then attempts to estimate the impact of change on federal spending and revenues. Proponents argue dynamic scoring would take into account a better understanding of the impact of revenue and spending legislation on the entire economy. Opponents argue dynamic scoring is subject to biased assumptions concerning the economy.
In what is sometimes called static scoring, CBO, along with the JCT, produces estimates labeled by the Committee on Responsible Federal Budget as “micro-dynamic scoring. CBO takes into account estimates of spending programs, timing of economic activity and the impact on revenues. CBO does not estimate the impact of each bill on the economy. Proponents argue such scoring is the best estimate of the impact of revenue and spending bills on the federal budget, while taking into account some economic activity. Opponents argue static scoring underestimates the impact of legislation on the macroeconomy.
As late as November 2014, CBO addressed its rationale for not using dynamic scoring in a footnote in a document entitled “How CBO Analyzes the Effects of Changes in Federal Fiscal Policies on the Economy”. In that footnote, CBO, which has not used macroeconomic effects of scoring since its inception in 1974, stated:
CBO’s estimates of the budgetary effects of proposed legislation generally do not reflect changes in behavior that would affect total output in the economy, such as any changes in the labor supply or private investment resulting from changes in fiscal policy. That is, CBO’s cost estimates generally do not include what is sometimes known as “dynamic scoring.” The convention of not incorporating macroeconomic effects in cost estimates…primarily reflects several facts: Doing macroeconomic analysis of all proposed legislation would not be feasible; nearly all proposed legislation analyzed by CBO would have negligible macroeconomic effects (and thus negligible feedback to the federal budget); and estimates of macroeconomic effects are highly uncertain.
What does this all have to do with health care policy? Recall that the Patient Protection and Affordable Care Act included a provision concerning wellness. CBO refused to score this provision because it did not see a budgetary impact. Yet it is common knowledge among health care policy experts that wellness programs save money because patients take a greater role in their own health outcomes. As such, active wellness patients generally have fewer interactions with health care providers. For dynamic scoring to be used on a House health bill, though, it would have to be fairly large, such as a possible future Medicare physician payment permanent fix, or be so designated by the House Budget Committee Chair.
The discussion around dynamic scoring has focused mainly on tax legislation and whether such scoring would under- or over-estimate the impact of such legislation on the nation’s economy. Republicans tend to support dynamic scoring, while Democrats generally support static scoring. The House has spoken on the issue by changing its rules.
The Senate has not addressed this matter. If the Senate does nothing, then there will be an institutional conflict between the two Houses as both may produce legislation with different CBO/JCT scores. One means of determining the process will be the decision by the House and Senate as to a new CBO director. If they select a dynamic scoring supporter, then we may see an overall change in all CBO scoring. If not, the House rules change may simply add to the current legislative gridlock. Whatever, the decision, health care legislation will be impacted. We just don’t know how much at the moment. Stay tuned.
Julius W. Hobson, Jr. is Senior Policy Advisor at Polsinelli P.C. and Adjunct Professor of Political Management, Graduate School of Political Management, George Washington University