CBO Decides Against Crazy Ruling That Would Kill Health Reform
This is going to be one of those posts where I try to convince you that a dull, technical decision by the Congressional Budget Office is really a very big deal. Here goes: The CBO has decided against counting premiums paid under an individual mandate as a tax. In other words, if the government says you have to purchase health insurance, and you give Aetna $50 to purchase some health insurance, the CBO has decided that you're not, in fact, paying a $50 tax to the government. That $50 will not be included in the price tag of the health reform bill.
To us laypeople, that sounds pretty intuitive. But not so to CBO. In 1994, a pretty similar question was decided in the other direction. Robert Reischauer, then the director of the CBO, decided that the premiums that individuals were charged to purchase private insurance under Clinton's plan would be included in the budget. This didn't change the nature of the proposal. But it made its cost tag look huge.
Donna Shalala, Clinton's secretary of health and human services, later termed the ruling "devastating." And it was. It made health care reform look obscenely expensive. And the same thing could have happened this year. Rather than costing $100 billion per year or so, it could have cost a couple trillion a year. No change in the plan. Just a change in the budgetary treatment of the plan.
But CBO is not repeating that decision this year. Or at least doesn't seem to be (as Jon Cohn says, the ruling is a bit opaque). My understanding of CBO's argument is that an individual mandate operating in a largely private insurance market is no problem. Go to something that's more like single-payer lite -- where the public insurer, say, is dominant -- and that changes.
Even so, I'm cheered by the simple existence of this ruling. The fact that CBO is explaining its thinking before legislation arrives yet more evidence that CBO appears, insofar as it can, to be trying to help out on health reform. By all accounts, they're offering their rulings early, erring on the side of caution, and not making any sudden moves that will disrupt the reform process. They're telling reformers how to work around CBO, in other words. That's an important change from past years.
For more on the decision, see CBO director Doug Elmendorf's blog post.
Update: Commenter CastorP kindly writes, "You should link to your Peter Orszag profile--it was reading that where I got a good sense of how important the CBO is." Link to my own work? I think I can manage that.
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