The Budgetary Treatment of Proposals to Change the Nation’s Health Insurance System

Source: Congressional Budget Office, Economic and Budget Issue Brief, May 27, 2009

The Congress is currently considering various approaches for instituting major changes in the nation’s system of health insurance. Some of those proposals would significantly expand the federal government’s role in that system, thus raising the question of how such changes might be reflected in the federal budget. This brief describes the approach that the Congressional Budget Office (CBO) will take in judging the appropriate budgetary treatment.

In determining the budgetary treatment of a new program, CBO considers how similar existing programs appear in the budget and how the basic principles that underlie federal budgeting may apply. The most straightforward situation is one in which money flows through a federal agency or some entity acting on behalf of a federal agency. In those cases, the cash flows generally appear in the federal budget. But the major changes being contemplated for the nation’s health insurance market are quite different from existing federal programs. Many of those changes would involve a mix of governmental activities and private transactions that have some similarities to other programs but are also different in significant ways. In addition, the scope of the changes and the amounts of money involved are substantial; even if there was a clear parallel in an existing but much smaller program, the budgetary treatment of health care legislation would nevertheless merit careful consideration.

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