OMB should finalize the proposed revisions to Circular A-4

BCHC signed onto a letter led by the National Health Law Program to comment on the proposed updates to Circular A-4. The revisions will update the Office of Management and Budget’s (OMB) review of proposed regulations and spending.

The regulatory process has a profound impact on access to health coverage and health care. The proposed revisions to Circular A-4 better account for the experiences of low-income and underserved populations and will promote more equitable access to health coverage and health care. The proposed reforms will also make the regulatory process more efficient, accessible, and effective at protecting the public.

Modernization of the Discount Rate

Lowering the discount rate will yield a more appropriate analysis of rules that impose costs in the short-term, but also create long-term benefits. OMB’s proposed changes would allow federal agencies to place a higher benefit on the long-term cost and benefits of regulations, to better account for how they play out over time.

Focus on Distributional Effects

We support OMB’s emphasis that agencies should consider distributional effects in conducting their benefit-cost analyses — that is, how regulatory actions will have different impacts on different groups. Regulations issued by the Department of Health and Human Services (HHS) should consider the impact on low-income and underserved populations.

Application of the Marginal Costs of Public Funds Factor

We also believe that OMB appropriately advises federal agencies against applying a “marginal cost of public funds” factor when evaluating spending rules. The effect of current spending on future taxation is too uncertain to consider when considering the costs of regulations. Furthermore, even if taxation did increase in the future as a result of increased spending now, the distributional benefits of such taxation might offset its distortionary costs.

Other Changes

We note that the changes to Circular A-4 appropriately reflect that transfers—such as increases in government health care spending—can “induce important behavioral changes.” We appreciate OMB’s emphasis on income weighting, recognizing an obvious truth: that the gain or loss of one dollar has very different consequences for a low-income worker than it does for a millionaire.

However, current standards treat the economic costs or benefits of a regulation the same for all people, regardless of income. Without income weighting, federal regulators may undervalue the benefits and harms a regulation may have on lower-income and underserved communities.