By Dan Crippen
December 19, 2017 at 5:00 am ET
Estimating probabilities is an essential part of the Congressional Budget Office’s work. This is true in scoring the pending tax legislation, it being necessary to make innumerable assumptions regarding tax revenue collections based on projected changes in the behavior of taxpayers over the next decade and beyond. Similarly, CBO must estimate the costs of programs like federal crop insurance by using experience to calculate the likelihood of droughts, floods and other unforeseeable events that can affect supply, demand and price.
Where CBO has greater difficulty in fulfilling its mission – and where this affects Congress’s necessary ability to construct policy – is with new health care programs that do not have a history that allows probabilistic estimates. This is the case with both the Independent Payment Advisory Board and the Center for Medicare and Medicaid Innovation.
CMMI was created by the Affordable Care Act to test new health care payment and delivery concepts. CBO analysts assumed that among the many changes tested by CMMI, there was a probability that some would produce significant dollar savings when applied to the entire population. Based on this assumption, CBO constructed a series of annual savings attributed to CMMI activity without knowing the exact policies that would be implemented, the entity being new and having no track record.
This unusual assumption is particularly problematic because CMMI has, since its creation, asserted broad demonstration authority that would allow it to expand any experiment it deemed to save funds to the entire Medicare population without a change in the law and without the approval of Congress. Regulation would, in these cases, replace legislation. Further, if Congress chose to exert its authority and delay or repeal a CMMI regulation, a portion of the “savings” CBO attributed to CMMI would have to be replaced by other spending reductions or revenue increases. Congress would essentially have to find a way to “pay for” its legitimate oversight and purview over Medicare policy.
We see similar problems in the CBO treatment of the activities of the Independent Payment Advisory Board. This 15-member board (or the Secretary of Health and Human Services if a board has not been appointed, which is currently the case) is responsible for proposing changes in Medicare to close any gap between actual spending and specific statutory targets. Once the process is triggered, actions by IPAB or the Secretary of HHS and the Congress are prescribed.
CBO must assess the probability that Medicare spending will exceed targets, and by how much, in each year for the next 10 years. To do so requires estimates of the growth in the economy and actual spending, the spending targets, and the effect of subsequent IPAB recommendations if the target is exceeded in any given year. Initially, CBO thought IPAB would be triggered and savings would begin in 2015. Subsequently, the Medicare actuary predicted a triggering in 2017, which will not occur. The most recent estimates by CBO now show savings in 2022 and beyond, but it is entirely possible that this projection could also change.
Whenever IPAB is triggered, Congress’s prerogatives in shaping Medicare policy are extremely constricted. The only congressional alternatives allowed under the statute are (1) amending, with limitations, the IPAB recommendations while achieving the same savings, or (2) disapproving the recommendations by supermajorities in both houses and agreement by the President. The statute also prohibits Congress from using other legislative measures to change the IPAB budget targets.
As with CMMI, any lessening of the IPAB requirements or repeal of the entire process would require that Congress pay for the reduction in savings as estimated by CBO. In fact, Congress has been attempting to repeal IPAB since its creation, but has been stymied by this requirement for offsetting savings. (Recently, the House passed repeal legislation that does not offset these projected lost savings, but that bill has not yet seen Senate action.)
Medicare spending is obviously of concern to Congress and the executive branch. However, procedures that circumvent the role of elected lawmakers and strain the separation of powers constitute a bridge too far. That some of these procedures require speculative estimates to implement while further impeding the ability of Congress to act exacerbates this transfer of power to the executive. IPAB and CMMI both suffer from these limitations.
Dan Crippen is a former director of the Congressional Budget Office and was previously executive director of the National Governors Association.
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