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

2CO NGRES S IO NA L BUDGE T O F F IC E

National Spending for Health Care

0

5

10

15

20

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

Percentage of GDP

3CO NGRES S IO NA L BUDGE T O F F IC E

National Spending for Health Care, 2015

1

5 6

Medicare

4CO NGRES S IO NA L BUDGE T O F F IC E

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.

5CO NGRES S IO NA L BUDGE T O F F IC E

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

6CO NGRES S IO NA L BUDGE T O F F IC E

Health Care Spending in the Long Term

7CO NGRES S IO NA L BUDGE T O F F IC E

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.

8CO NGRES S IO NA L BUDGE T O F F IC E

Spending in the Past and Under CBO’s Extended Baseline

Percentage of Gross Domestic Product

9CO NGRES S IO NA L BUDGE T O F F IC E

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

10CO NGRES S IO NA L BUDGE T O F F IC E

Composition of Federal Noninterest Spending Under CBO’s Extended Baseline

Percent

11CO NGRES S IO NA L BUDGE T O F F IC E

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).

12CO NGRES S IO NA L BUDGE T O F F IC E

0.0

0.5

1.0

1.5

2.0

2.5

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

13CO NGRES S IO NA L BUDGE T O F F IC E

Population, by Age GroupMillions of People

14CO NGRES S IO NA L BUDGE T O F F IC E

Projected Spending Growth in the Major Health Care Programs

Percentage of Gross Domestic Product

15CO NGRES S IO NA L BUDGE T O F F IC E

An Overview of the Long-Term Budget Outlook

16CO NGRES S IO NA L BUDGE T O F F IC E

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

17CO NGRES S IO NA L BUDGE T O F F IC E

Federal Spending and Revenues

Percentage of Gross Domestic Product

Actual Projected

18CO NGRES S IO NA L BUDGE T O F F IC E

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

19CO NGRES S IO NA L BUDGE T O F F IC E

Federal Debt Held by the Public

Percentage of Gross Domestic Product

20CO NGRES S IO NA L BUDGE T O F F IC E

Uncertainty in the Long-Term Projections

21CO NGRES S IO NA L BUDGE T O F F IC E

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

22CO NGRES S IO NA L BUDGE T O F F IC E

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

0

1

2

3

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)

23CO NGRES S IO NA L BUDGE T O F F IC E

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

Percentage of Gross Domestic Product

0

50

100

150

200

250

2000 2005 2010 2015 2020 2025 2030 2035 2040 2045

206

150

109

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

24CO NGRES S IO NA L BUDGE T O F F IC E

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