How Does Congressional Budget Office Scoring Work?

A conversation with a former director of the agency on the American Health Care Act vote and how health-care legislation is appraised by the federal government

Former CBO Director Douglas Holtz-Eakin providing an update to the 2004 Budget and Economic Outlook in September of that year. (Pablo Martinez Monsivais / AP)

Updated on May 4 at 2:41 p.m. ET

The House of Representatives passed the American Health Care Act on Thursday on a tight, party-line vote. After weeks of setbacks and negotiations, the White House and GOP leaders in Congress had seemed confident ahead of the vote that the amended law would have enough support among both moderate Republicans and the more conservative Freedom Caucus to pass and proceed to the Senate.

The decision to push for a vote this week had proved controversial, as there is little consensus on what the revised law will actually do. A collection of amendments added after its initial drafting—including one from Representative Tom MacArthur allowing states to waive certain protections for preexisting conditions, and two amendments that set aside $23 billion total for high-risk pools in states—carry downstream consequences, like changes in employer plans or increased costs for sick people. But House Republicans were invested in moving quickly—eschewing hearings on the law and allowing limited time for analysis and consideration. Perhaps more consequentially, they voted before its specs could be reappraised by the Congressional Budget Office, the agency that evaluates a law’s potential outcomes.

But what exactly does the CBO’s work entail, and why is its scoring important? In lieu of a report from the office itself, I spoke with former CBO Director Doug Holtz-Eakin on the agency’s role and his own analysis of the amended AHCA. He was a director during the George W. Bush administration and is now president of the center-right think tank American Action Forum. The following interview, conducted before the House vote, has been edited for length and clarity.

Vann R. Newkirk II: Can you walk us through what the traditional CBO scoring process is like for a major health-reform bill like the AHCA?

Douglas Holtz-Eakin: As the legislation is being developed, the staff on the Hill will be in contact with CBO describing what they’re going to do, so CBO has some notion of what’s coming their way. Congress will then provide them, typically, with some sort of outline of the structure of the bill, and CBO will give some sort of estimate of the implications. Then they’ll actually have to write the legislative language and send that to CBO, and there will be several iterations on that. Then there will be final legislation as well, and CBO will write a formal cost estimate. That describes the budgetary impact of the legislation—what does it do to revenues coming in and spending going out?—and often, for health legislation, provides some supplementary information on premiums and coverage implications of the bill.

The Budget Act of 1974 said that if you’re going to consider language that contains a congressional authorization, there should be a CBO score that accompanies it—so that’s the basis for which this process was set up. Congress can waive the CBO score at any time. It gets done differently in every circumstance.

Newkirk: In your tenure, did you have any situation where Congress decided, on a final bill, to waive or bypass the CBO scoring?

Holtz-Eakin: We did a lot of things with the Medicare Modernization Act, the Part D program; we put a score out for that, of course. But people would put up amendments on the floor without having any CBO score and without knowing. That’s not uncommon at all. In this circumstance with the AHCA, Congress isn’t waiting for the final score, but CBO did put out the score on the base bill a couple weeks ago, and these three amendments don’t really change that. They’re really tiny tweaks in my view. And we know what adding $15 billion and $8 billion costs: $23 billion. So I don’t think there’s any real big mystery here.

Newkirk: And knowing the spending is the most important part of the CBO process.

Holtz-Eakin: Right. The CBO’s job is budget, and the budget stuff is clear. When it goes over to the Senate, I’ll expect modifications, and CBO will have to score it again, otherwise they can’t get reconciliation protection and they can’t roll it out with 51 votes.

Newkirk: What do you think the broader economic effects of the three amendments might be?

Holtz-Eakin: I don’t think they’re terribly consequential. We’re going to continue to study them. But at least, to my eye, the MacArthur amendment provides for the possibility that a state might waive some of the base requirements in the ACA. While you’re not going to get 50 states doing that, there’s some subset of them that may do it at some point. Those states can only take waivers if they satisfy certain conditions, so that restricts some of the potential effects.

The people affected primarily by those state waivers would be those that have some sort of costly preexisting condition and who failed to maintain continuous coverage. They would then, for only one year, have more expensive insurance, and then afterward they’d be back in the continuous-coverage provisions without additional penalty. So, how many people is that? Well, we’re starting with about 11 million people in the individual markets—not that many to begin with. You’ll have some fraction of the states apply for a waiver and some tiny fraction of the people will have that circumstance of having an expensive condition and not having insurance for a certain period. That’s not a big number.

Newkirk: You just walked me through that with informed assumptions at every level. For an official CBO analysis on something like that, how does the CBO traditionally make, workshop, and test those assumptions?

Holtz-Eakin: For something like determining what states will do, it’s extremely difficult. What CBO does is they look at any other bill that had similar provisions and how that worked out. That’s the first thing they check for. They’ll also just talk to the states and ask, “Given this situation, what would you do? Would you apply for a waiver or not? What kinds of things would you pursue?” And then they reach some sort of judgment. CBO doesn’t ever do a state-by-state prediction, but they will say: “We think roughly a third or a quarter of states might be interested, and if so they might do something like this.” And they’ll describe, to the best of their ability, their judgment. And this is a judgment, and that’s why they get paid the big bucks. It’s a hard job. But they have to put a number on it.