Congressional Budget Office Director Keith Hall has repeatedly stressed that the agency’s top priorities are to provide accurate, vetted cost estimates and legislative analysis to Members of Congress and to continue to work to improve transparency on the methods and assumptions used to determine its cost estimates. In June, NTUF wrote about an area where CBO failed to live up to these standards it set for itself. While the agency’s commitment is a laudable one, there is more work to be done to make greater transparency a reality.
CBO discovered belatedly that it had made an error in a cost estimate for a provision in the Bipartisan Budget Act earlier this year. The BBA required drug manufacturers to increase the discount rates for medication in the coverage gap, or “donut hole,” in Medicare Part D. In February, CBO determined that this would impact the budget by $7.7 billion over ten years. Afterwards, they realized that they had not included the most recent data in the original score. CBO’s April Budget Outlook baseline figure for Medicare included an update that the impact would be $11.8 billion – a 53 percent adjustment to this provision.
While it is good that CBO realized that it had made a mistake and took steps to correct the score, they did not do so in a way that was publicly transparent. It took prodding by a House committee chair to get the root of what happened.
Last Friday, CBO published a letter with more information regarding the failure to use the best, most current data to produce cost estimates:
Shortly after the Bipartisan Budget Act was enacted, CBO learned of data on prescription drug discounts in the coverage gap that had been available when the estimate was prepared but stored in an unexpected place—grouped with information about the Medicare Advantage program. When CBO learned of and reviewed that information, the agency determined that the data indicated a different estimate ... .
The letter also laid out steps the agency would pursue to help prevent such problems from reoccurring:
CBO is redoubling its efforts to ensure that analysts’ searches for available data are as thorough as possible in the time available and that those searches include consultations with parties who might know of relevant data, some of which could be stored in unexpected places.
While corrections are to be encouraged so that lawmakers have the best possible data and analysis to evaluate policies and programs, the problem is that this correction was made without forthright disclosure. CBO’s response failed to adequately address the shortcomings of transparency of this matter. The letter noted that the agency had briefed budget committee staff and didn’t make a more public notice available because, “the Congress did not pursue further legislation pertaining to the coverage gap, and CBO does not continuously update estimates of legislation that has already been enacted.”
In many other instances, CBO has issued more detailed corrections to cost estimates on its website, including this 2016 correction regarding a “typographical error” in a cost estimate. In 2015, an estimate was slightly revised to add “a word that was inadvertently left out.” The impact of the change in CBO’s Part D score correction deserved at least as much disclosure as those relatively minor issues. The mandated discount rate that federal law requires manufacturers to apply on pharmaceuticals is a cost on the industry, leading to reduced investment in research and development of new drugs and can cause new drugs to be released at a higher price. CBO could also have simply added a footnote to the Budget Outlook with a brief explanation of the correction. This little step would have gone a long way to improve transparency.