CBO Releases Long-Term Budget Outlook: 5 Things to Know About Federal Healthcare Program Spending

During the next 25 years, U.S. budget deficits are expected to rise and increase federal debt held by the public to the highest percentage in the country's history since just after World War II, according to the Congressional Budget Office's 2014 long-term budget outlook.

Overall federal spending is expected to increase to 26 percent of GDP by 2039, up from 21 percent in 2013, according to the CBO. The long-term outlook also includes projections concerning the federal government's spending on healthcare. Here are five things to know from the report about spending estimates for major government healthcare programs.

1. Federal spending on government healthcare programs — including Medicare, Medicaid, the Children's Health Insurance Program and subsidies for health insurance purchased through the Patient Protection and Affordable Care Act exchanges — is expected to increase from just below 5 percent of gross domestic product currently to 8 percent of GDP in 2039, according to the report.

2. The projected rise in federal spending on these major healthcare programs reflects an aging population, an expectation that healthcare costs per beneficiary will grow faster than potential GDP per capita and the expansion of federal subsidies for Medicaid and exchange coverage according to the CBO. During the next 25 years, the CBO projects aging will account for 39 percent of the programs' spending growth relative to GDP, excess cost growth will account for 33 percent and 28 percent will stem from the expansion of federal subsidies.

3. Under the CBO's extended baseline, approximately one-fifth of federal spending on major healthcare programs in 2024 will go toward care for able-bodied and nonelderly people. Roughly three-fifths will go toward care for those 65 and older, while the remaining fifth will be spent on blind and disabled individuals. Beyond 2024, the share of spending on federal healthcare programs that goes toward people 65 and older is expected to rise slowly as the population continues to age.

4. Gross Medicare spending is expected to increase from 3.5 percent of GDP this year to 5.7 percent in 2039. Among Medicare beneficiaries 65 and older, the portion significantly older than 65 is expected to increase during the next 25 years. People 75 and older will represent about 50 percent of the elderly Medicare beneficiary population in 2039, according to the CBO. However, they will account for an estimated 60 percent of the program's spending, given that Medicare tends to spend more on older patients. In calendar year 2011, the program spent an average of $8,500 per beneficiary for 75-year-olds, compared with $4,500 for 66-year-olds.

5. Beyond the next 25 years, the population is expected to age less rapidly. Furthermore, Medicaid expansion and the addition of exchange subsidies will likely have less of an influence on spending growth after they take full effect. Therefore, spending growth will slow, according to the CBO.

For more information, read the full report here.

More Articles on Healthcare Spending:
10 Countries Spending the Most on Healthcare
The Medicare Spending Growth Slowdown: 5 Things to Know
The Healthcare Spending Slowdown in the U.S. and Globally: 5 Things to Know 

 

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