The Congressional Budget Office (CBO) is dramatically reducing its estimate of how many individuals will obtain health coverage this year through the public exchanges established under Section 1311 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). In its annual budget and economic outlook report, the CBO estimates that 13 million individuals, and not 21 million as previously forecasted, will be covered through plans obtained on the insurance exchanges. The CBO also released its projections for increased spending in health care over the next 10 years (CBO Report, January 25, 2016).
Deficit and growth. The CBO estimates that the federal budget deficit will grow to $544 billion in 2016 after six years of decline, and will raise the debt held by the public to 76 percent of the gross domestic product (GDP). It also predicts solid, short-term economic growth followed by slower growth in the following years (see Health care spending to contribute to ballooning deficit as economy expands, January 19, 2016).
ACA exchanges. Federal spending on ACA exchange subsidies is projected to total $39 billion in 2016 and to reach $93 billion by 2026. In 2015, an average of eight million people per month received subsidies under Section 1401 of the ACA for plans purchased through the exchanges. The CBO also estimates that, on average, 11 million people per month will receive such subsidies in 2016 and that an additional two million people who are not eligible for subsidies will purchase insurance on the exchanges. This would bring total enrollment to 13 million individuals per month, which is lower than previous CBO projections of 21 million individuals enrolled per month.
Health programs. Gross federal outlays for Medicare, Medicaid, and other major health care programs totaled $1.0 trillion in 2015, which represented 40 percent of gross mandatory spending and 5.8 percent of the GDP. The CBO predicts that gross federal outlays for those health care programs will rise to $1.1 trillion in 2016 and will grow “robustly” at an average rate of almost six percent per year. As a result, the spending on such programs will reach $2.0 trillion or 7.4 percent of GDP by the end of 2026. Three-fifths of total spending on health care programs would be dedicated to financing care for people aged 65 years or older.
Medicare. Gross spending on Medicare will amount to $692 billion in 2016, and will reach almost $1.3 trillion, or 4.7 percent of GDP by 2026. However, Medicare also collects substantial offsetting receipts in the form of premiums, which will rise from $101 billion in 2016 to $210 billion in 2026. Medicare spending net of the offsetting receipts is projected to be 3.2 percent of GDP in 2016 and 3.9 percent in 2026. Without considering the offsetting receipts, Medicare spending is projected to grow by about 6 percent per year over the next 10 years, partly due to an increasing number of beneficiaries and rising per-beneficiary costs.
Medicaid. Section 2001 of the ACA gave states the option to expand eligibility for the Medicaid programs. Federal outlays for Medicaid amounted to $350 billion in 2015, which was 16 percent than in 2014, due mostly to the increased enrollment of newly eligible individuals. While federal Medicaid spending is expected to rise by nine percent this year, spending from 2017 through 2026 is expected to grow more slowly than the previous two years because the rapid growth in enrollment will have slowed by then. Spending per enrollee is expected to grow at an average rate of three percent from 2017 to 2026. By 2026, federal Medicaid spending is projected to reach $642 billion.
CHIP. Total spending on the Children’s Health Insurance Program (CHIP) was approximately $9 billion in 2015, and is expected to reach $13 billion by 2016 due to the federal match rate that went into effect in January 2016.
Spending. The CBO says that the comparatively slow growth in Medicare per-beneficiary spending over the next decade results from an anticipated influx of new beneficiaries who will bring down the average age and will use fewer health care services and thereby reduce costs. Another factor is the slowdown in the growth of Medicare spending across all types of services, geographic areas and beneficiaries in recent years. The CBO predicts that this slowdown will persist for several years. Additionally, service payment rate constraints will also contribute to the slow in per beneficiary spending.
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