Health Reform WK-EDGE Means-tested spending projected to grow slower than Medicare, Social Security over next decade
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Tuesday, February 28, 2017

Means-tested spending projected to grow slower than Medicare, Social Security over next decade

By Anthony H. Nguyen, J.D.

The Congressional Budget Office (CBO) has projected that if current laws remain unchanged, total mandatory spending—excluding any offsets—would grow at an average annual rate of 5.5 percent over the next decade, which is the same average annual rate observed for the past 10 years. Mandatory spending on means-tested programs such as Medicaid, Supplemental Nutrition Assistance Program (SNAP), or Supplemental Social Security Income would grow at a smaller average annual rate of 4.3 percent compared to 6.0 percent for non-means-tested programs such as Medicare or Social Security (CBO Report, February 16, 2017).

In the CBO’s analysis, the average annual growth in outlays for means-tested programs for the period of 2018–2027 is below the 6.8 percent the agency estimates for the same programs over the 2008–2017 period. In contrast, the rate of growth projected for non-means tested programs is roughly 1 percentage point higher over the coming decade, which the CBO attributed to the increasingly aged U.S. population. The CBO focused on programs that were projected to significantly differ from the past decade.

Medicaid. Spending rose by 35 percent from 2008 to 2010 both because of enrollment growth and as a result of a temporary increase in the federal matching rate. There was a slight decline in growth, but with Medicaid expansion phased in under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), Medicaid growth increased by 32 percent from 2013 to 2015. The spending on Medicaid rose only 5 percent in 2016 and the CBO projected this to hold true for the next decade.

CHIP. Spending authority for the Children’s Health Insurance Program (CHIP) is set to expire at the end of fiscal year 2017. The CBO assumed in its baseline projections that annual funding for the program after 2017 will continue at $5.7 billion. Thus, the CBO noted that spending for CHIP is projected to drop to $11 billion in 2018 and to about $6 billion in subsequent years.

Medicare Part D. Spending for the low-income subsidy component of Medicare Part D is projected to grow at an annual average rate of nearly 8 percent between 2017 and 2027, which projects to be at the same rate as the total outlays for all of Part D. Increases in the number of beneficiaries account for about one-third of the growth; the remainder is attributable to the selection of new, expensive prescription drugs, along with higher prices for existing prescription drugs.

ACA premium subsidies. Payments for these subsidies for ACA insurance purchases totaled $31 billion in fiscal year 2016. The CBO projected to rapid growth in 2017 and 2018, because of the enrollment numbers. However, the CBO expected that the numbers would moderate for 2019 to 2022 period, with annual growth in spending to average about 3 percent a year between 2022 and 2027.

ReportsLetters: CBOReports AgencyNews CHIPNews EnrollmentNews GeneralNews HealthInsuranceExchangeNews MedicaidNews MedicaidExpansionNews MedicarePartDNews PremiumNews PremiumTaxNews

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