Factors Underlying CBO’s Long-Term Outlook for Federal Health Care Spending

Congressional Budget Office

Presentation to the Council for Affordable Health Coverage and the American Action Forum

November 1, 2017

Keith Hall

DirectorFor more details, see Congressional Budget Office, The 2017 Long-Term Budget Outlook (March 2017), www.cbo.gov/publication/52480.

Factors Underlying CBO’s Long-Term Outlook for Federal Health Care Spending

1CO NGRES S IO NA L BUDGE T O F F IC E

Health Care Spending Today

National Spending for Health Care

1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Percentage of GDP

National Spending for Health Care, 2015

Medicare

CBO defines outlays for the major health care programs as spending for:

Medicare,

Medicaid,

The Children’s Health Insurance Program (CHIP), and

Subsidies for health insurance purchased through the marketplaces established under the Affordable Care Act and related spending.

Net Outlays for Major Health Care Programs in 2017

Medicare 590

Medicaid 385

Health Insurance Subsidies and Related Spending 51

Children's Health Insurance Program 15

_____________

Total 1,041

Billions of Dollars

Health Care Spending in the Long Term

If current laws generally remained unchanged, CBO projects that federal spending on the major health care programs would grow larger than any other category of spending.

Spending in the Past and Under CBO’s Extended Baseline

Percentage of Gross Domestic Product

Spending on the major health care programs would account for 40 percent of federal noninterest spending in 2047, compared with 28 percent today.

Composition of Federal Noninterest Spending Under CBO’s Extended Baseline

Percent

Two factors explain the projected growth in spending on major health care programs: aging and rising health care costs per person (also known as excess cost growth).

1985–2014 2018–2027 2028 2047 1988–2014 2018–2027 2028 2047

Medicare and Medicaid Private Health Insurance

Estimated and Projected Rates of Excess Cost Growth in Spending for Health Care

Percent

Population, by Age GroupMillions of People

Projected Spending Growth in the Major Health Care Programs

An Overview of the Long-Term Budget Outlook

If current laws governing taxes and spending did not change, the condition of the federal budget would worsen considerably over the next three decades.

Federal Spending and Revenues

Actual Projected

As a result, debt would grow larger in relation to the economy than ever recorded in U.S. history.

Federal Debt Held by the Public

Uncertainty in the Long-Term Projections

Excess cost growth is a significant driver of future debt and an important source of uncertainty in CBO’s projections.

Excess Cost Growth Rates for Federal Spending on Medicare and Medicaid (30-Year Average)

2005 2010 2015 2020 2025 2030 2035 2040 2045

Last Year of the 30-Year Average

Actual Projected

1.1 (Extended Baseline)

0.1 (Lower Rate)

2.1 (Higher Rate)

Federal Debt Given Different Rates of Excess Cost Growth for Federal Spending on Medicare and Medicaid

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

Actual Projected Given Rates 1 Percentage Point Higher

Extended Baseline, With Excess Cost Growth of 1 Percent in 2047

Given Rates 1 Percentage Point Lower

This presentation will be available on CBO’s website, www.cbo.gov.

Factors Underlying CBO’s Long-Term Outlook for Federal Health Care Spending

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