ACA To Help Curb Entitlement Spending Over 25 Years, CBO Says
Cost-control measures implemented under the Affordable Care Act will help to lower the growth in federal health care spending over the next two-and-a-half decades, according to a Congressional Budget Office report released Tuesday, The Hill reports.
According to the report, spending on the federal government's major health programs -- Children's Health Insurance Program, Medicaid, Medicare and subsidies to help U.S. residents purchase coverage through the ACA's health insurance exchanges -- will equal about 8% of the country's gross domestic product in 2039. Last year, CBO projected that such spending would make up 8.1% of GDP in 2039. The 0.1 percentage point decrease would account for around $250 billion in savings in today's dollars (Al-Faruque, The Hill, 7/15).
Specifically, Medicare will account for 4.6% of the country's GDP by 2039, down from last year's estimate of 4.9%. The projections take into account Medicare data from 2012, during which Medicare spending shrank as a proportion of the overall economy (Sanger-Katz, "Upshot," New York Times, 7/15).
Overall, the report noted that its estimate for the cost of Medicare and Medicaid from 2010 to 2020 dropped by $1.23 trillion (Montgomery, "Wonkblog," Washington Post, 7/15).
The report found that although total government spending on the CHIP, Medicaid, Medicare and insurance subsidies for plans purchased through the ACA's exchanges likely will increase, various ACA provisions will help to hold down some of the estimated growth.
For example, the report notes that CBO's estimates account for "reductions in Medicare's payments to physicians scheduled for 2015 and reductions in Medicare spending specified in the Budget Control Act of 2011, as amended, for 2015 through 2024." CBO wrote that Medicare will likely continue to make payments based on current law after 2024.
Health Care Spending Highest Debt Contributor
The report warned that spending growth in programs such as Medicare, Medicaid and Social Security will swell the national debt to "unsustainable" levels (The Hill, 7/15). It noted that it cannot determine where recent Medicare spending slowdowns originated or how long they will last ("Upshot," New York Times, 7/15). According to the report, the federal government this year will spend $1 trillion of its total $3.5 trillion budget on health care. That is more than it will spend on any other category.
Further, the report cited the ACA as a major factor contributing to cost growth, likely accounting for nearly 62% of projected health spending growth by 2024. However, extra costs associated with an aging population will become the lead spending growth factor by 2039 ("Wonkblog," Washington Post, 7/15).
Currently, federal debt comprises 74% of the country's GDP. CBO estimates that debt will increase to 106% of the country's GDP by 2039 (The Hill, 7/15).
Medicare Trust Fund Solvent Until 2030
Meanwhile, CBO said that Medicare's trust fund, which handles physician payments, will be solvent until 2030, the Wall Street Journal's "Washington Wire" reports.
Trustees that monitored the fund in 2006 said it would become insolvent in 2018, resulting in sharp benefit cuts. However, the CBO report estimated that fund's balance will grow from $206 billion in 2013 to $261 billion in 2024, when it will then start to decline.
CBO said less government spending on health care and the ACA have helped the program to remain solvent for longer (Paletta, "Washington Wire," Wall Street Journal, 7/15).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.