CBO, JCT share methods for analyzing legislative proposals impacting health insurance coverage

The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) revealed in a recent report how they jointly analyze proposed legislation that would impact health insurance coverage for individuals younger than age 65, detailing how they develop analytic strategies, model a proposal’s effect, and finalize their analysis (CBO Report, February 2018).

Analytic strategy development

First, the CBO and JCT put together an analytic strategy. The agencies formally develop their strategy once the proposed legislation’s specifications become available, an official request for analysis has been made, and the CBO and JCT arrange the time to commence the analysis. However, the agencies also often work informally with Congressional staff during development of the proposal. The agencies begin by reviewing the policy specifications. The CBO and JCT consider how the proposed legislation would impact existing law and how the proposed legislation is different from earlier proposal drafts. The agencies work to verify that the Congressional staff’s intent is reflected in the language and then estimate the legislative effect by, namely, identifying how the proposal could affect health insurance coverage and the federal budget.

The CBO and JCT focus on the policy changes most likely to impact health insurance coverage or cost, ranging from the straight-forward to the more complex. Another key aspect the agencies consider is timing and what additional “administrative infrastructure” is necessary to bring about the changes of the proposed legislation—and how long it would take to do so. The timing element includes estimates of how other stakeholders (state governments, insurers, employers, etc.) would respond and how long it would take for them to implement the proposed changes. To help with their estimates, the agencies rely on past cases of legislative reform programs. Further, the agencies seek input from outside experts and existing evidence while maintaining the required confidentiality of a proposal.

Proposal effect modeling

Second, the CBO and JCT undertake modelling the impact of the proposed legislation. Primarily, the agencies rely on CBO’s health insurance simulation model (HISIM), Medicaid enrollment and cost models, and JCT’s individual tax model. These models use data on health insurance coverage information for everyone younger than 65, Medicaid enrollment and expenditures, and detailed tax return information. The agencies also draw estimates based on information HISIM cannot project, namely, the behavior of states, employers, and insurers. These initial projections are incorporated as inputs into HISIM (state, employer, and individual enrollee behavior) or assessed outside HISIM (insurer behavior). CBO and JCT also use HISIM to estimate stakeholder responses to new coverage options. Medicaid enrollment and cost projections use HISIM estimates in addition to a more detailed Medicaid model and other methods. JCT usually provides estimates of proposed tax liability changes using its individual tax model.


Finally, both the CBO and JCT engage in rigorous review of their respective analysis results in order to ensure objectivity and proper analysis. Specifically, they examine results of one or more years out of the 10-year projection period to ensure that the analysis is being computed as intended and compare results against previous analyses. The agencies also inspect for programming errors or unexplained results. The CBO and JCT consider changes to the results if there were different critical inputs. The agencies prepare a formal written estimate and explanation thereof and, before releasing it to Congress and the public, agency staff carefully review the report.

Medicaid and CHIP are catching uncovered kids, the ACA helps

Due to high rates of Medicaid and Children’s Health Insurance Program (CHIP) coverage for young children, only 3.3 percent of children ages three and younger were uninsured in 2016. Coverage of both young children (age three and younger) and their parents increased under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) in 2014 and 2015—a trend that continued in 2016. According to an Urban Institute report, young children and their families continued to rely on Medicaid and CHIP in 2016, with 48.5 percent of young children covered by Medicaid or CHIP. In comparison, only 42 percent of older children were covered by the programs.

Trends. Nearly half of young children and one-fifth of the parents of young children were covered by Medicaid and CHIP in 2015 as well. The high incidence of Medicaid and CHIP coverage is partly due to higher incidence of family characteristics among parents of younger children, including lower incomes, younger parents, and mixed immigration status.

Variance. Despite high overall levels of coverage, the prevalence of health insurance coverage for young children and their families continued to vary across state lines. Uninsurance rates were below 2 percent in 12 states but above 8 percent in three states—Alaska, Wyoming, and North Dakota. Additionally, the expansion of state Medicaid programs under the ACA continues to be a significant source of variation in state uninsurance levels for the parents of young children. For example, an estimated 8.7 percent of parents of young children in expansion states were uninsured in 2016, whereas 18 percent of parents of young children were uninsured in nonexpansion states.

Hospital organizations again advocate for delay of Medicaid DSH reductions

Nine hospital organizations have urged Congress to further delay the start of Medicaid disproportionate share hospital (DSH) cuts, which are set to begin in fiscal year (FY) 2018. The organizations, including the American Hospital Association (AHA), wrote letters to both the House and the Senate.

State Medicaid programs make DSH payments to qualifying that serve a large number of Medicaid and uninsured patients. Section 2551 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) would have reduced federal DSH allotments beginning in 2014 to account for the decrease in uncompensated care anticipated under health insurance coverage expansion. Legislation has since delayed the Medicaid DSH reduction; most recently, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) (P.L. 114-10) delayed the reductions until FY 2018 through FY 2025 (see Soc. Sec. Act Sec. 1923(f)).

The organizations contended, however, that “the coverage rates envisioned under the ACA have not been fully realized,” and many Americans remain uninsured. In addition, Medicaid underpayment poses an ongoing financial challenge for hospitals.

In July 2017 CMS issued a Proposed rule (82 FR 35155, July 28, 2017) that would implement the annual DSH allotment reductions using a DSH health reform methodology (see CMS proposes updated method to calculate ACA-mandated Medicaid allotment reductions, Health Law Daily, August 2, 2017). Commenting on the Proposed rule, the AHA advocated for the repeal of the ACA Medicaid DSH allotment reductions and requested that CMS delay the implementation of the FY 2018 DSH allotment reductions (see AHA raises concerns about proposed reductions in DSH allotments, Health Law Daily, August 30, 2017).

AHA raises concerns about proposed reductions in DSH allotments

The American Hospital Association (AHA) is urging CMS to delay the implementation of the fiscal year (FY) 2018 disproportionate share hospital (DSH) allotment reductions due to significant concerns about the data the agency proposed to use in the DSH Health Reform Methodology (DHRM), according to a letter sent to CMS Administrator Seema Verma. In addition, the AHA is continuing to advocate for the repeal of the Medicaid DSH reductions in the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The AHA noted that although Congress cut DSH payments based on its reasoning that hospitals would care for fewer uninsured patients as health care coverage expanded, the projected increase in coverage has not been fully realized. This is because some states chose not to expand Medicaid and there is lower-than-anticipated enrollment in health insurance coverage through the health insurance marketplace.

AHA raised two key issues within the Proposed rule: (1) the data sources used in the DHRM, with a focus on transparency, completeness, and timelines of the data; and (2) the proposed cap that would limit the reductions to only 90 percent of a state’s DSH allotment.


Section 2551 of the ACA established that state Medicaid DSH allotments would be reduced annually in the aggregate in consideration of certain statutory factors. In 2013, CMS published a Final rule that finalized a methodology only for fiscal years (FY) 2014 and 2015 in anticipation of re-evaluation following implementation of the ACA (see CMS lays out methodology for Medicaid DSH reductions in 2014 and 2015, September 16, 2013).

Proposed rule

The Proposed rule reflects a DHRM that accounts for relevant data that was unavailable to CMS during prior rulemaking for DSH allotment reductions originally set to take place for FY 2014 and FY 2015 (see CMS proposes updated method to calculate ACA-mandated Medicaid allotment reductions, Health Law Daily, July. 28, 2017).

Data sources

According to the AHA,CMS plans to use its FY 2017 Medicaid DSH allotment determination, Medicaid Inpatient Utilization Rate (MIUR) data reported by states, and Medicaid DSH audit data reported by the states for state plan rate year 2013. AHA claims that because none of the listed sources are publicly available CMS cannot deliver on its intent to use transparent and readily available data. In addition, CMS has not provided states or stakeholders with the technical guidance on the calculations and data sources to be used as it indicated it would provide in its 2013 Final rule. AHA stressed that having accurate MIUR data is critical to ensuring states are treated equitably under the proposed formula and the delay in the data is a significant limitation to the accuracy of the methodology. The FY 2017 allotments are not expected to be made public until after the start of FY 2018, a further delay of information.

DSH allotment reduction cap

The AHA supports CMS’ proposal to cap DSH allotment reductions at 90 percent of a state’s allotment. The proposal would prevent any state from losing it entire DSH allotment and, therefore could receive an allotment after FY 2025, AHA said. However, AHA suggested that CMS consider a lower cap for the DSH allotment reductions because the number of states affected is likely to be small.