The Congressional Budget Office Needs to Be Reformed

The Congressional Budget Office is not politically biased. But its work is beset by challenges that run much deeper than that: They are structural, and require us to think about both the CBO and the larger congressional budget process in which it plays a part in terms of institutional reform. When legislation is built around eccentricities in the CBO model, as Obamacare was in some key respects, the CBO finds itself confronted with some very strange problems. One is the tendency of the CBO to model competition as having minimal effect on costs while modeling price controls to be efficient and effective. Competition is obviously much more difficult to model than mandates and price controls, but the agency’s experience with Medicare Advantage and the Medicare prescription-drug benefit suggests that it tends to significantly understate the effects of competition — which obviously has consequences for its scoring of reforms intended to increase the market orientation of the health-care system.
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