5 Key CBO Healthcare Spending and Policy Projections

Congressional Budget Office Director Doug Elmendorf, PhD, spoke at the American Enterprise Institute's World Forum about healthcare policy last week.

moneyIn a blog post, Dr. Elmendorf summarized his comments on healthcare policy and highlighted these five key aspects of the CBO's projections concerning healthcare spending and federal programs.

1. Under current law, the CBO projects net federal spending for major healthcare programs will grow from approximately 4.5 percent of gross domestic product in 2013 to more than 6 percent of GDP in 2024. Major healthcare programs include Medicare, Medicaid, the Children's Health Insurance Program and the subsidy program helping people pay for coverage through the Patient Protection and Affordable Care Act exchanges.

2. The CBO also estimates the number of people younger than 65 without health insurance will decline from 57 million to 31 million during the next decade. That includes 24 million who will get coverage through the exchanges and 13 million who will receive coverage because of Medicaid expansion under the PPACA, offset by a decline in the number of people with employer-based coverage and individual coverage outside of the exchanges.

3. Under current law, the CBO expects the number of Medicare beneficiaries will grow by more than a third during the next decade, as the population ages. By 2024, about 60 percent of baby boomers will be eligible for Medicare.

4. Despite that rise in enrollment, the CBO projects Medicare spending per person will rise more slowly during the next decade than it did during the past few decades. This is a result of constraints on payment rates imposed by the PPACA and the sustainable growth rate for physician reimbursement (although Congress has been working to repeal and replace the SGR). The past several years have also shown slow growth in the amount and intensity of care provided per beneficiary, a trend that is expected to continue. The influx of baby boomers will also lower the average age of Medicare beneficiaries and, subsequently, average spending per person, since younger people generally cost the program less.

5. Finally, in 2024, the CBO predicts most federal healthcare spending will be on people older than 65, notwithstanding an expansion of subsidies for younger people. This is partly because of the influx of Medicare beneficiaries. The aging population will also drive up Medicaid spending, since older program beneficiaries tend to cost more because of their greater need for acute care and for long-term care. According to the CBO, about three-fifths of net federal spending on major healthcare programs will go toward care for people older than 65.

More Articles on Healthcare Spending:
Obama's Budget for 2015: 10 Points for Hospitals Know
Report: Recession Didn't Stop Growth in Healthcare Spending on Children
Study: Inpatient Hospital Prices Drive Spending Differences 

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