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Congressional Budget Office
Health Care Spending Today and in the Future:Impacts on Federal Deficits and Debt
Presentation to a Conference Organized by the Center for Sustainable Health Spending, Washington, DC
July 18, 2017
Jessica BanthinDeputy Assistant Director
For more details, see CBO, The 2017 Long-Term Budget Outlook (March 2017), www.cbo.gov/publication/52480
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1CO N GR ES S IO N A L B UDGE T O F F IC E
An Overview of the Long-Term Budget Outlook
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2CO N GR ES S IO N A L B UDGE 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.
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3CO N GR ES S IO N A L B UDGE T O F F IC E
Growth in federal spending would continue to outpace growth in federal revenues, leading to ever larger budget deficits.
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4CO N GR ES S IO N A L B UDGE T O F F IC E
Federal Spending and RevenuesPercentage of Gross Domestic Product
Actual Projected
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5CO N GR ES S IO N A L B UDGE 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.
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6CO N GR ES S IO N A L B UDGE T O F F IC E
Federal Debt Held by the PublicPercentage of Gross Domestic Product
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7CO N GR ES S IO N A L B UDGE T O F F IC E
Federal spending is projected to rise notably in relation to the economy because of growth in spending on Social Security, the major health care programs, and interest on the government’s debt.
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8CO N GR ES S IO N A L B UDGE T O F F IC E
Components of Federal SpendingPercentage of Gross Domestic Product
0
5
10
15
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045
Major Health Care Programs
Other Noninterest SpendingSocial SecurityNet Interest
ProjectedActual
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9CO N GR ES S IO N A L B UDGE T O F F IC E
Health Care Spending Today
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10CO N GR ES S IO N A L B UDGE T O F F IC E
National Spending for Health Care, 2015
1
5 6
Medicare
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11CO N GR ES S IO N A L B UDGE T O F F IC E
CBO defines outlays for the major health care programs as spending for:
• Medicare,• Medicaid,• Children’s Health Insurance Program (CHIP), and • Subsidies for health insurance purchased
through the marketplaces established under the Affordable Care Act and related spending.
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12CO N GR ES S IO N A L B UDGE 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
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13CO N GR ES S IO N A L B UDGE T O F F IC E
Health Care Spending in the Long-Term Budget Outlook
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14CO N GR ES S IO N A L B UDGE T O F F IC E
If current laws generally remain unchanged, CBO projects that federal spending on the major health care programs would grow larger than any other category of spending.
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15CO N GR ES S IO N A L B UDGE T O F F IC E
Spending in the Past and Under CBO’s Extended Baseline
Percentage of Gross Domestic Product
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16CO N GR ES S IO N A L B UDGE 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.
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17CO N GR ES S IO N A L B UDGE T O F F IC E
Composition of Federal Noninterest Spending Under CBO’s Extended Baseline
Percent
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18CO N GR ES S IO N A L B UDGE T O F F IC E
Spending on Medicare is projected to drive much of the growth in spending on major health care programs.
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19CO N GR ES S IO N A L B UDGE T O F F IC E
Federal Spending on the Major Health Care Programs, by Category
Percentage of Gross Domestic Product
Projected
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20CO N GR ES S IO N A L B UDGE 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, or excess cost growth.
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21CO N GR ES S IO N A L B UDGE T O F F IC E
Projected Spending Growth in the Major Health Care Programs
Percentage of Gross Domestic Product
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22CO N GR ES S IO N A L B UDGE T O F F IC E
Population, by Age GroupMillions of People
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23CO N GR ES S IO N A L B UDGE T O F F IC E
Uncertainty in the Long-Term Projection
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24CO N GR ES S IO N A L B UDGE T O F F IC E
Even if future tax and spending policies matched the policies specified under current law, budgetary outcomes would undoubtedly differ from CBO’s projections because of changes in the economy, demographics, and other factors, such as excess cost growth.
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25CO N GR ES S IO N A L B UDGE 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 ProjectedGiven Rates 1 Percentage Point Higher
Extended Baseline, With Excess Cost Growth of 1 Percent in 2047
Given Rates 1 Percentage Point Lower
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26CO N GR ES S IO N A L B UDGE T O F F IC E
This presentation will be available on CBO’s website, www.cbo.gov.