As part of the legislative process, the Congressional Budget Office provides Congress with cost estimates for legislation, economic and budget projections, and other economic assessments. An important element of CBO’s analyzes is information from the research community. This is the third in a series of blog posts discussing research that would improve the quality of information used by CBO in its work. (Earlier posts in the series discussed the need for new research in the areas of energy and the environment and finance.) Send your comments to firstname.lastname@example.org.
CBO regularly provides information to Congress about the effects of legislative proposals that would modify federal health care policies. The agency is seeking new research on a variety of topics in the health field, including the cost structures of health care providers and the market for long-term services and supports (LTSS). CBO is currently working on these topics, and there are significant gaps in the relevant research literature.
CBO projects federal subsidies for health care by evaluating enrollment in various forms of health insurance coverage, premiums for that coverage, prices and use of medical goods and services, and per capita subsidies for various types of expenditures. The agency uses a variety of methods and models to assess how individuals, employers, states and health care service providers would respond to changes in health care policies. These models, in turn, require estimates of certain parameters to predict how equilibrium prices, premiums or the use of services would change.
CBO relies on its own analyzes and estimates from the relevant research literature to inform its estimates of these parameters. For example, after reviewing evidence on how changes in healthcare providers’ payment rates affect the provision of their services, CBO updated its estimate of how the provision of services would respond to significant changes in certain payment rates your suppliers. There are many related areas where better data and more research would enhance the agency’s work.
CBO recently analyzed several legislative proposals that would significantly change provider payment rates or health insurance coverage—areas that would benefit from further study. The proposals included implementing a single-payer health care system in the United States (CBO 2020), lowering the eligibility age for Medicare (CBO 2022), and modifying the market for LTSS—which is health care and related services to help people. who have functional or cognitive limitations, carry out normal daily activities over a long period of time.
Future CBO analyzes of proposals dealing with similar issues would benefit from further study of the impact of large changes in payment rates or insurance coverage on the provision of health care services. Empirical evidence is particularly limited on two topics in particular: provider cost structures and the market for LTSS.
How Would Healthcare Providers Cope With an Income or Cost Shock?
CBO frequently analyzes policies that affect payment rates for health care providers or their costs of providing care. For example, policies can directly affect provider revenues by changing the prices administered for Medicare-covered services or they can change the amounts commercial insurers pay providers by changing the bargaining leverage between them.
There has long been concern that reductions in provider payment rates would negatively impact the quality of patient care and access to care. Changes in access to care, in turn, may affect the federal budget. For example, if many providers leave a market as a result of a policy, patients may receive less care or receive care in different settings, or both. Those changes could have an impact on federal spending. However, providers have many ways to adjust to changes in the payments they receive. In fact, the research on how they have adjusted shows a range of responses — such as a reduction in the amount of care they provide, especially for elective procedures (Clemens and Gottlieb 2014 torrent); staff reduction (Wu and Shen 2014 torrent); or how they diagnose a code change (Daphne 2005). A better understanding of the flexibility of providers’ cost structures, the main components of their fixed and variable costs, and how they respond to changes in revenue would improve CBO’s estimates of the effects of certain legislative proposals.
CBO also evaluates policies that affect providers’ administrative burdens, such as streamlining requirements for obtaining prior authorization for medical services. Based on recent research (Dunn et al. 2021), the agency estimates that reducing the provider’s administrative burden would increase the amount of care delivered by the provider, thereby increasing federal spending. Additional evidence would help to refine that and other estimates.
How Would Medicaid Benefit Changes for Long-Term Services and Supports Affect the Federal Budget?
Medicaid is the primary payer for LTSS; the federal government pays about 65 percent of LTSS costs. In CBO projections, by 2030, Medicaid spending on home and community-based services will be $160 billion, while spending on institutional care will be $80 billion. These projections reflect estimates of Medicaid enrollment and growth in payment rates for LTSS providers, as well as an expectation of a continued shift in care delivery from institutions to community settings.
Studies have provided conflicting evidence on how policy changes, such as expanded Medicaid eligibility, affect the demand for nursing home care (Van Houtven et al., 2020, Grabowski and Gruber 2007 torrent). CBO analyzes could benefit from additional research that evaluates how changes in federal policy would affect the share of the population with LTSS needs using institutional and home or community services. Deaths during the coronavirus pandemic have been disproportionately high among nursing home residents. As a result, the uncertainty of CBO’s estimates of the desirability of institutional care, the number of institutional residents, and the available workforce increased.
CBO uses several models to estimate how changes in Medicaid eligibility, benefits, or payment rates would affect the federal budget. In addition, the agency is developing a micro-simulation model to better represent the distribution of individual responses to policy changes – instead of an approach focused on average responses – and important relationships between key variables, such as LTSS use and income (Goda, Golberstein, and Grabowski 2011 torrent).
Depending on the policy data being analyzed, CBO models may account for the substitutability of paid and unpaid care, changes from private or state to federal funding, the supply of LTSS workers, and whether changes affect utilization LTSS on the use. medical services, among other factors. Additional research on these topics could improve CBO’s estimates of the effects of legislative proposals related to LTSS.
Chapin White is the CBO’s Director of Health Analysis. This blog post includes contributions from the following CBO staff: Carrie H. Colla (former CBO), Scott Craver, Noelia Duchovny, Sean Dunbar, Tamara Hayford, Jeffrey Kling, Paul Masi, Sarah Masi, and Daria Pelech.