SlideShare a Scribd company logo
1 of 14
Download to read offline
Presentation at the 15th Annual Meeting of the OECD’s Working Party of
Parliamentary Budget Officials and Independent Fiscal Institutions
April 13, 2023
Julie Topoleski
Director of the Labor, Income Security, and Long-Term Analysis Division
Long-Term Projections of
Health Care Spending and the
Implications for the Federal Budget
For more information about the meeting, see www.oecd.org/gov/budgeting/parliamentary-budget-officials.
1
Data source: Centers for Medicare & Medicaid Services.
National Health Expenditures
Health care spending in the
United States has grown
over time. Since 1960, it has
more than tripled as a
percentage of gross
domestic product (GDP).
0
5
10
15
20
25
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Percentage of Gross Domestic Product
2
Congressional Budget Office, The 2022 Long-Term Budget Outlook (July 2022), www.cbo.gov/publication/57971.
Federal Spending, by Category
Over the long term, net
spending for interest and
outlays for the major health
care programs and Social
Security are projected to rise
in relation to GDP; other
spending, in total, is
projected to decline.
3
Congressional Budget Office, The Budget and Economic Outlook: 2023 to 2033 (February 2023), www.cbo.gov/publication/58848.
Spending on the Major Federal Health Care Programs
Over the next decade,
federal spending on the
major health care programs
grows by more than one
percent of GDP in CBO’s
projections. The increase is
driven primarily by growth in
Medicare spending.
0
1
2
3
4
5
6
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033
Medicare Medicaid
Premium Tax Credits and Related Spending Children's Health Insurance Program
Percentage of Gross Domestic Product
4
Congressional Budget Office, Federal Subsidies for Health Insurance Coverage for People Under 65: 2022 to 2032 (June 2022), www.cbo.gov/publication/57962.
Subsidies for Employment-Based Health Insurance Coverage
As a percentage of GDP,
federal subsidies for
employment-based
coverage are projected to
grow over the coming
decade.
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
Percentage of Gross Domestic Product
5
CBO’s 10-year baseline budget projections provide a benchmark for estimates of
the costs of legislative proposals. Those projections are based, in part, on
detailed modeling of the health care system.
The agency uses a more aggregate and mechanical approach to project
spending for the two decades that follow that initial 10-year projection period.
How CBO Projects Spending on Health Care
6
CBO’s analysts start with the most recent data on Medicare spending available.
They then use the following pieces to build the projections:
▪ Medicare population (based on CBO’s projections of the total population by
age and sex and on data on Medicare participation),
▪ Price (Medicare’s payment rates),
▪ Changes in the age-and-sex mix of the Medicare population,
▪ Anticipated policy changes, and
▪ Growth in Medicare spending that cannot be explained by those four
factors.
10-Year Projections for Medicare
7
Congressional Budget Office, The 2022 Long-Term Budget Outlook (July 2022), www.cbo.gov/publication/57971.
Composition of Growth in Outlays for the Major Health Care
Programs and Social Security, 2022 to 2052
Much of the growth in
spending on the major
health care programs and on
Social Security results from
the aging of the population.
Growth in spending on the
major health care programs
is also driven by cost growth
above and beyond that
accounted for by
demographic changes or the
growth of potential GDP per
person.
8
Congressional Budget Office, The Demographic Outlook: 2023 to 2053 (January 2023), www.cbo.gov/publication/58612.
Aging of the Population
In CBO’s projections, the
number of people ages 25 to
54, which partially
determines the number of
people employed, grows
more slowly than the
number of people age 65 or
older, who are less likely to
work and who are generally
eligible for Social Security
and Medicare.
9
CBO uses its beneficiary cost index to calculate the effects of demographic changes on health care spending. For spending on Medicare, that index accounts for information on age,
sex, time until death, and the original reason for beneficiaries’ Medicare entitlement. For Medicaid, the index incorporates information about average spending by type of beneficiary:
child, adult, aged, or disabled.
How CBO Defines Additional Cost Growth
Growth in Health
Outlays
Additional Cost
Growth
Growth in
Potential Nominal
GDP per Person
Growth in CBO’s
Beneficiary Cost
Index
10
To estimate additional cost growth in the health care sector, CBO used essentially the same method that the Centers for Medicare & Medicaid Services’ Office of the Actuary uses to
produce the 75-year projections of Medicare spending for its annual report to the Congress. Within that framework, CBO uses its own estimates of key parameters: an income-
technology elasticity of 1.27, an insurance elasticity of −0.20, and a price elasticity of −0.55. For a discussion of the methods underlying projections by the Office of the Actuary, see
Stephen K. Heffler and others, Centers for Medicare & Medicaid Services, Office of the Actuary, memorandum about the long-term projection assumptions for Medicare and aggregate
national health expenditures (April 22, 2020), https://tinyurl.com/msfjx6te (PDF).
The estimates of additional cost growth in CBO’s projections move linearly from
the rates at the end of the 10-year budget period to the estimated rates at the end
of the 30-year projection period.
CBO’s estimate of additional cost growth in health care overall in 2052 is
0.6 percent.
CBO’s Estimate of Additional Cost Growth
11
Growth in real national income per person has been—and, in CBO’s
estimation, will continue to be—the most significant factor in the growth of
spending on health care. The agency projects that in 2052, that factor would
account for just over half of the additional cost growth.
Increasing medical prices have been—and, in CBO’s estimation, will continue
to be—another significant factor in the growth of spending on health care. The
agency projects that in 2052, such increases would account for slightly less
than half of the additional cost growth.
Changes in out-of-pocket spending for health care have historically been an
important factor in the growth of spending on health care. However, CBO projects
that, under current law, the out-of-pocket share of national health expenditures
would not change over the 30-year projection period. That is, the agency does
not expect changes in out-of-pocket spending to contribute to additional cost
growth in 2052.
Three Key Factors Contributing to Additional Cost Growth
in the Health Care Sector
12
Ongoing Analysis
▪ Budget baseline projections
– Impact of the coronavirus pandemic
– Demographics (fertility, mortality)
▪ Insurance coverage projections
▪ Projections of health care spending
Recent Reports
▪ A description of who was uninsured in
2019 and why
▪ Review of health care prices by payer
▪ Single-payer series: budgetary effects,
financing, macroeconomic effects
▪ Drug prices and innovation
Recent Analysis of Legislation,
Including Cost Estimates
▪ Surprise billing
▪ Legislation in response to the coronavirus
pandemic
– Medicaid continuous coverage
– Timing of the public health emergency
▪ Expansion of Affordable Care Act
subsidies in the American Rescue Plan
Act and in the proposed reconciliation
legislation
▪ Medicare expansions: dental, vision,
hearing
▪ Drug price negotiation
▪ Medicare Part D benefit design
▪ Immunosuppressant drugs
What Types of Products About Health Care Does CBO Create?
13
The Budget and Economic Outlook: 2023 to 2033 (February 2023),
www.cbo.gov/publication/58848.
The Demographic Outlook: 2023 to 2053 (January 2023),
www.cbo.gov/publication/58612.
The 2022 Long-Term Budget Outlook (July 2022),
www.cbo.gov/publication/57971.
Federal Subsidies for Health Insurance Coverage for People Under 65:
2022 to 2032 (June 2022), www.cbo.gov/publication/57962.
More of CBO’s work on health care can be found at
www.cbo.gov/topics/health-care.
Relevant CBO Publications

More Related Content

Similar to Long-Term Projections of Health Care Spending and the Implications for the Federal Budget

Cbo 2013 ltbo44521 ltbo 0
Cbo 2013 ltbo44521 ltbo 0Cbo 2013 ltbo44521 ltbo 0
Cbo 2013 ltbo44521 ltbo 0
editorinchief
 

Similar to Long-Term Projections of Health Care Spending and the Implications for the Federal Budget (20)

CBO’s Work on Health Care and a Call for New Research
CBO’s Work on Health Care and a Call for New ResearchCBO’s Work on Health Care and a Call for New Research
CBO’s Work on Health Care and a Call for New Research
 
Health Insurance for People Younger Than Age 65: Expiration of Temporary Poli...
Health Insurance for People Younger Than Age 65: Expiration of Temporary Poli...Health Insurance for People Younger Than Age 65: Expiration of Temporary Poli...
Health Insurance for People Younger Than Age 65: Expiration of Temporary Poli...
 
How CBO Prepares Projections of Federal Spending for Social Security and Majo...
How CBO Prepares Projections of Federal Spending for Social Security and Majo...How CBO Prepares Projections of Federal Spending for Social Security and Majo...
How CBO Prepares Projections of Federal Spending for Social Security and Majo...
 
Health Care and the Federal Budget
Health Care and the Federal Budget Health Care and the Federal Budget
Health Care and the Federal Budget
 
CBO's Analysis of Health Care Spending and Policy Proposals
CBO's Analysis of Health Care Spending and Policy ProposalsCBO's Analysis of Health Care Spending and Policy Proposals
CBO's Analysis of Health Care Spending and Policy Proposals
 
The Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget OfficeThe Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget Office
 
Factors Underlying CBO’s Long-Term Outlook for Federal Health Care Spending
Factors Underlying CBO’s Long-Term Outlook for Federal Health Care SpendingFactors Underlying CBO’s Long-Term Outlook for Federal Health Care Spending
Factors Underlying CBO’s Long-Term Outlook for Federal Health Care Spending
 
The 2018 Long-Term Budget Outlook in 25 Slides
The 2018 Long-Term Budget Outlook in 25 SlidesThe 2018 Long-Term Budget Outlook in 25 Slides
The 2018 Long-Term Budget Outlook in 25 Slides
 
An Overview of CBO’s Estimates of Federal Subsidies for Health Insurance for ...
An Overview of CBO’s Estimates of Federal Subsidies for Health Insurance for ...An Overview of CBO’s Estimates of Federal Subsidies for Health Insurance for ...
An Overview of CBO’s Estimates of Federal Subsidies for Health Insurance for ...
 
Projections of Federal Spending on Major Health Care Programs
Projections of Federal Spending on Major Health Care ProgramsProjections of Federal Spending on Major Health Care Programs
Projections of Federal Spending on Major Health Care Programs
 
Cbo 2013 ltbo44521 ltbo 0
Cbo 2013 ltbo44521 ltbo 0Cbo 2013 ltbo44521 ltbo 0
Cbo 2013 ltbo44521 ltbo 0
 
How CBO Evaluates Health Care Proposals
How CBO Evaluates Health Care ProposalsHow CBO Evaluates Health Care Proposals
How CBO Evaluates Health Care Proposals
 
The Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget OfficeThe Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget Office
 
Shifting Priorities in the Federal Budget
Shifting Priorities in the Federal BudgetShifting Priorities in the Federal Budget
Shifting Priorities in the Federal Budget
 
HISIM2: The Health Insurance Simulation Model Used in Preparing CBO’s July 20...
HISIM2: The Health Insurance Simulation Model Used in Preparing CBO’s July 20...HISIM2: The Health Insurance Simulation Model Used in Preparing CBO’s July 20...
HISIM2: The Health Insurance Simulation Model Used in Preparing CBO’s July 20...
 
The Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget OfficeThe Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget Office
 
Shifting Priorities in the Federal Budget
Shifting Priorities in the Federal BudgetShifting Priorities in the Federal Budget
Shifting Priorities in the Federal Budget
 
U.S. Macroeconomic & Fiscal Outlook
U.S. Macroeconomic & Fiscal OutlookU.S. Macroeconomic & Fiscal Outlook
U.S. Macroeconomic & Fiscal Outlook
 
MountainOrMolehill011011
MountainOrMolehill011011MountainOrMolehill011011
MountainOrMolehill011011
 
Comparing CBO’s Long-Term Projections With Those of the Social Security Trustees
Comparing CBO’s Long-Term Projections With Those of the Social Security TrusteesComparing CBO’s Long-Term Projections With Those of the Social Security Trustees
Comparing CBO’s Long-Term Projections With Those of the Social Security Trustees
 

More from Congressional Budget Office

More from Congressional Budget Office (20)

The Outlook for the Budget and the Economy
The Outlook for the Budget and the EconomyThe Outlook for the Budget and the Economy
The Outlook for the Budget and the Economy
 
The U.S. Budget and Economic Outlook (Presentation)
The U.S. Budget and Economic Outlook (Presentation)The U.S. Budget and Economic Outlook (Presentation)
The U.S. Budget and Economic Outlook (Presentation)
 
CBO’s Recent Appeals for New Research on Health-Related Topics
CBO’s Recent Appeals for New Research on Health-Related TopicsCBO’s Recent Appeals for New Research on Health-Related Topics
CBO’s Recent Appeals for New Research on Health-Related Topics
 
How the Congressional Budget Office Assists Lawmakers
How the Congressional Budget Office Assists LawmakersHow the Congressional Budget Office Assists Lawmakers
How the Congressional Budget Office Assists Lawmakers
 
Introduction to the Role of the Congressional Budget Office
Introduction to the Role of the Congressional Budget OfficeIntroduction to the Role of the Congressional Budget Office
Introduction to the Role of the Congressional Budget Office
 
The Federal Perspective on Coverage of Medications to Treat Obesity: Consider...
The Federal Perspective on Coverage of Medications to Treat Obesity: Consider...The Federal Perspective on Coverage of Medications to Treat Obesity: Consider...
The Federal Perspective on Coverage of Medications to Treat Obesity: Consider...
 
CBO’s Approach to Estimating the Budgetary Effects of the No Surprises Act of...
CBO’s Approach to Estimating the Budgetary Effects of the No Surprises Act of...CBO’s Approach to Estimating the Budgetary Effects of the No Surprises Act of...
CBO’s Approach to Estimating the Budgetary Effects of the No Surprises Act of...
 
The Budget and Economic Outlook for 2024 to 2034: Press Briefing Slides
The Budget and Economic Outlook for 2024 to 2034: Press Briefing SlidesThe Budget and Economic Outlook for 2024 to 2034: Press Briefing Slides
The Budget and Economic Outlook for 2024 to 2034: Press Briefing Slides
 
The Economic Outlook for 2024 to 2034 in 19 Slides
The Economic Outlook for 2024 to 2034 in 19 SlidesThe Economic Outlook for 2024 to 2034 in 19 Slides
The Economic Outlook for 2024 to 2034 in 19 Slides
 
Using Multiple Data Sources to Learn About the Race and Ethnicity of Taxpayers
Using Multiple Data Sources to Learn About the Race and Ethnicity of TaxpayersUsing Multiple Data Sources to Learn About the Race and Ethnicity of Taxpayers
Using Multiple Data Sources to Learn About the Race and Ethnicity of Taxpayers
 
Perspectives on the Navy’s 2024 Shipbuilding Plan
Perspectives on the Navy’s 2024 Shipbuilding PlanPerspectives on the Navy’s 2024 Shipbuilding Plan
Perspectives on the Navy’s 2024 Shipbuilding Plan
 
The 2024 Outlook for Navy Shipbuilding: Familiar Plans and Higher Costs
The 2024 Outlook for Navy Shipbuilding: Familiar Plans and Higher CostsThe 2024 Outlook for Navy Shipbuilding: Familiar Plans and Higher Costs
The 2024 Outlook for Navy Shipbuilding: Familiar Plans and Higher Costs
 
CBO’s Use of GitHub
CBO’s Use of GitHubCBO’s Use of GitHub
CBO’s Use of GitHub
 
Exploring the Effects of Medicaid During Childhood on the Economy and the Budget
Exploring the Effects of Medicaid During Childhood on the Economy and the BudgetExploring the Effects of Medicaid During Childhood on the Economy and the Budget
Exploring the Effects of Medicaid During Childhood on the Economy and the Budget
 
Atlas of Military Compensation
Atlas of Military CompensationAtlas of Military Compensation
Atlas of Military Compensation
 
Approaches to Estimating the Noncyclical Rate of Unemployment
 Approaches to Estimating the Noncyclical Rate of Unemployment Approaches to Estimating the Noncyclical Rate of Unemployment
Approaches to Estimating the Noncyclical Rate of Unemployment
 
Projecting the Effects of U.S. Federal Policies on Electric Vehicle Demand an...
Projecting the Effects of U.S. Federal Policies on Electric Vehicle Demand an...Projecting the Effects of U.S. Federal Policies on Electric Vehicle Demand an...
Projecting the Effects of U.S. Federal Policies on Electric Vehicle Demand an...
 
CBO’s Recent Appeals for New Research to Enhance Its Work for the Congress
CBO’s Recent Appeals for New Research to Enhance Its Work for the CongressCBO’s Recent Appeals for New Research to Enhance Its Work for the Congress
CBO’s Recent Appeals for New Research to Enhance Its Work for the Congress
 
Trends in the Distribution of Household Income From 1979 to 2020
Trends in the Distribution of Household Income From 1979 to 2020Trends in the Distribution of Household Income From 1979 to 2020
Trends in the Distribution of Household Income From 1979 to 2020
 
The Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget OfficeThe Federal Budget Process and the Role of the Congressional Budget Office
The Federal Budget Process and the Role of the Congressional Budget Office
 

Recently uploaded

Dawson City Rolling Ads for May 15 2024 Yukon
Dawson City Rolling Ads for May 15 2024 YukonDawson City Rolling Ads for May 15 2024 Yukon
Dawson City Rolling Ads for May 15 2024 Yukon
pmenzies
 
Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...
Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...
Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...
Harm Kiezebrink
 

Recently uploaded (20)

Dawson City Rolling Ads for May 15 2024 Yukon
Dawson City Rolling Ads for May 15 2024 YukonDawson City Rolling Ads for May 15 2024 Yukon
Dawson City Rolling Ads for May 15 2024 Yukon
 
Tennessee DOT- TEVI Plan coordination & EV
Tennessee DOT- TEVI Plan coordination & EVTennessee DOT- TEVI Plan coordination & EV
Tennessee DOT- TEVI Plan coordination & EV
 
Harbin-Gross-Spring2022.pdf Yale Historical Review
Harbin-Gross-Spring2022.pdf Yale Historical ReviewHarbin-Gross-Spring2022.pdf Yale Historical Review
Harbin-Gross-Spring2022.pdf Yale Historical Review
 
Building a better Britain: How cities like Bradford can help to end economic ...
Building a better Britain: How cities like Bradford can help to end economic ...Building a better Britain: How cities like Bradford can help to end economic ...
Building a better Britain: How cities like Bradford can help to end economic ...
 
RPO America Peer Exchange: Rural Transportation Planning Programs
RPO America Peer Exchange: Rural Transportation Planning ProgramsRPO America Peer Exchange: Rural Transportation Planning Programs
RPO America Peer Exchange: Rural Transportation Planning Programs
 
PPT Item # 9 2ndQTR Financial & Inv. Report
PPT Item # 9 2ndQTR Financial & Inv. ReportPPT Item # 9 2ndQTR Financial & Inv. Report
PPT Item # 9 2ndQTR Financial & Inv. Report
 
Effective Financial Reporting - May 2024
Effective Financial Reporting - May 2024Effective Financial Reporting - May 2024
Effective Financial Reporting - May 2024
 
International Day of Families - 15 May 2024 - UNDESA.
International Day of Families - 15 May 2024 - UNDESA.International Day of Families - 15 May 2024 - UNDESA.
International Day of Families - 15 May 2024 - UNDESA.
 
Item # 9- 2nd Qtr Financial & Inv. Report
Item # 9- 2nd Qtr Financial & Inv. ReportItem # 9- 2nd Qtr Financial & Inv. Report
Item # 9- 2nd Qtr Financial & Inv. Report
 
bee engaged with youth - World Bee Day 2024
bee engaged with youth - World Bee Day 2024bee engaged with youth - World Bee Day 2024
bee engaged with youth - World Bee Day 2024
 
Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...
Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...
Low Atmospheric Pressure Stunning is not a humane alternative to Carbon Dioxi...
 
WhenWomenTakeControl.pdf Yale Historical Review
WhenWomenTakeControl.pdf Yale Historical ReviewWhenWomenTakeControl.pdf Yale Historical Review
WhenWomenTakeControl.pdf Yale Historical Review
 
Help set up SERUDS Orphanage virtual classroom
Help set up SERUDS Orphanage virtual classroomHelp set up SERUDS Orphanage virtual classroom
Help set up SERUDS Orphanage virtual classroom
 
Topical Guide for RID 3830 Public Image Training Series.ppsx
Topical Guide for RID 3830 Public Image Training Series.ppsxTopical Guide for RID 3830 Public Image Training Series.ppsx
Topical Guide for RID 3830 Public Image Training Series.ppsx
 
Rocky Mount Greenville Willson Regional Transit Plan
Rocky Mount Greenville Willson Regional Transit PlanRocky Mount Greenville Willson Regional Transit Plan
Rocky Mount Greenville Willson Regional Transit Plan
 
Electric Vehicle infrastructure planning in Rural Planning Organizations
Electric Vehicle infrastructure planning in Rural Planning OrganizationsElectric Vehicle infrastructure planning in Rural Planning Organizations
Electric Vehicle infrastructure planning in Rural Planning Organizations
 
Electric vehicle infrastructure in rural areas
Electric vehicle infrastructure in rural areasElectric vehicle infrastructure in rural areas
Electric vehicle infrastructure in rural areas
 
Nitrogen filled high expansion foam in open Containers
Nitrogen filled high expansion foam in open ContainersNitrogen filled high expansion foam in open Containers
Nitrogen filled high expansion foam in open Containers
 
EDI Executive Education MasterClass- 15thMay 2024 (updated).pdf
EDI Executive Education MasterClass- 15thMay 2024 (updated).pdfEDI Executive Education MasterClass- 15thMay 2024 (updated).pdf
EDI Executive Education MasterClass- 15thMay 2024 (updated).pdf
 
16 may, International Day of Living together in peace 2024
16 may, International Day of Living together in peace 202416 may, International Day of Living together in peace 2024
16 may, International Day of Living together in peace 2024
 

Long-Term Projections of Health Care Spending and the Implications for the Federal Budget

  • 1. Presentation at the 15th Annual Meeting of the OECD’s Working Party of Parliamentary Budget Officials and Independent Fiscal Institutions April 13, 2023 Julie Topoleski Director of the Labor, Income Security, and Long-Term Analysis Division Long-Term Projections of Health Care Spending and the Implications for the Federal Budget For more information about the meeting, see www.oecd.org/gov/budgeting/parliamentary-budget-officials.
  • 2. 1 Data source: Centers for Medicare & Medicaid Services. National Health Expenditures Health care spending in the United States has grown over time. Since 1960, it has more than tripled as a percentage of gross domestic product (GDP). 0 5 10 15 20 25 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Percentage of Gross Domestic Product
  • 3. 2 Congressional Budget Office, The 2022 Long-Term Budget Outlook (July 2022), www.cbo.gov/publication/57971. Federal Spending, by Category Over the long term, net spending for interest and outlays for the major health care programs and Social Security are projected to rise in relation to GDP; other spending, in total, is projected to decline.
  • 4. 3 Congressional Budget Office, The Budget and Economic Outlook: 2023 to 2033 (February 2023), www.cbo.gov/publication/58848. Spending on the Major Federal Health Care Programs Over the next decade, federal spending on the major health care programs grows by more than one percent of GDP in CBO’s projections. The increase is driven primarily by growth in Medicare spending. 0 1 2 3 4 5 6 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Medicare Medicaid Premium Tax Credits and Related Spending Children's Health Insurance Program Percentage of Gross Domestic Product
  • 5. 4 Congressional Budget Office, Federal Subsidies for Health Insurance Coverage for People Under 65: 2022 to 2032 (June 2022), www.cbo.gov/publication/57962. Subsidies for Employment-Based Health Insurance Coverage As a percentage of GDP, federal subsidies for employment-based coverage are projected to grow over the coming decade. 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 Percentage of Gross Domestic Product
  • 6. 5 CBO’s 10-year baseline budget projections provide a benchmark for estimates of the costs of legislative proposals. Those projections are based, in part, on detailed modeling of the health care system. The agency uses a more aggregate and mechanical approach to project spending for the two decades that follow that initial 10-year projection period. How CBO Projects Spending on Health Care
  • 7. 6 CBO’s analysts start with the most recent data on Medicare spending available. They then use the following pieces to build the projections: ▪ Medicare population (based on CBO’s projections of the total population by age and sex and on data on Medicare participation), ▪ Price (Medicare’s payment rates), ▪ Changes in the age-and-sex mix of the Medicare population, ▪ Anticipated policy changes, and ▪ Growth in Medicare spending that cannot be explained by those four factors. 10-Year Projections for Medicare
  • 8. 7 Congressional Budget Office, The 2022 Long-Term Budget Outlook (July 2022), www.cbo.gov/publication/57971. Composition of Growth in Outlays for the Major Health Care Programs and Social Security, 2022 to 2052 Much of the growth in spending on the major health care programs and on Social Security results from the aging of the population. Growth in spending on the major health care programs is also driven by cost growth above and beyond that accounted for by demographic changes or the growth of potential GDP per person.
  • 9. 8 Congressional Budget Office, The Demographic Outlook: 2023 to 2053 (January 2023), www.cbo.gov/publication/58612. Aging of the Population In CBO’s projections, the number of people ages 25 to 54, which partially determines the number of people employed, grows more slowly than the number of people age 65 or older, who are less likely to work and who are generally eligible for Social Security and Medicare.
  • 10. 9 CBO uses its beneficiary cost index to calculate the effects of demographic changes on health care spending. For spending on Medicare, that index accounts for information on age, sex, time until death, and the original reason for beneficiaries’ Medicare entitlement. For Medicaid, the index incorporates information about average spending by type of beneficiary: child, adult, aged, or disabled. How CBO Defines Additional Cost Growth Growth in Health Outlays Additional Cost Growth Growth in Potential Nominal GDP per Person Growth in CBO’s Beneficiary Cost Index
  • 11. 10 To estimate additional cost growth in the health care sector, CBO used essentially the same method that the Centers for Medicare & Medicaid Services’ Office of the Actuary uses to produce the 75-year projections of Medicare spending for its annual report to the Congress. Within that framework, CBO uses its own estimates of key parameters: an income- technology elasticity of 1.27, an insurance elasticity of −0.20, and a price elasticity of −0.55. For a discussion of the methods underlying projections by the Office of the Actuary, see Stephen K. Heffler and others, Centers for Medicare & Medicaid Services, Office of the Actuary, memorandum about the long-term projection assumptions for Medicare and aggregate national health expenditures (April 22, 2020), https://tinyurl.com/msfjx6te (PDF). The estimates of additional cost growth in CBO’s projections move linearly from the rates at the end of the 10-year budget period to the estimated rates at the end of the 30-year projection period. CBO’s estimate of additional cost growth in health care overall in 2052 is 0.6 percent. CBO’s Estimate of Additional Cost Growth
  • 12. 11 Growth in real national income per person has been—and, in CBO’s estimation, will continue to be—the most significant factor in the growth of spending on health care. The agency projects that in 2052, that factor would account for just over half of the additional cost growth. Increasing medical prices have been—and, in CBO’s estimation, will continue to be—another significant factor in the growth of spending on health care. The agency projects that in 2052, such increases would account for slightly less than half of the additional cost growth. Changes in out-of-pocket spending for health care have historically been an important factor in the growth of spending on health care. However, CBO projects that, under current law, the out-of-pocket share of national health expenditures would not change over the 30-year projection period. That is, the agency does not expect changes in out-of-pocket spending to contribute to additional cost growth in 2052. Three Key Factors Contributing to Additional Cost Growth in the Health Care Sector
  • 13. 12 Ongoing Analysis ▪ Budget baseline projections – Impact of the coronavirus pandemic – Demographics (fertility, mortality) ▪ Insurance coverage projections ▪ Projections of health care spending Recent Reports ▪ A description of who was uninsured in 2019 and why ▪ Review of health care prices by payer ▪ Single-payer series: budgetary effects, financing, macroeconomic effects ▪ Drug prices and innovation Recent Analysis of Legislation, Including Cost Estimates ▪ Surprise billing ▪ Legislation in response to the coronavirus pandemic – Medicaid continuous coverage – Timing of the public health emergency ▪ Expansion of Affordable Care Act subsidies in the American Rescue Plan Act and in the proposed reconciliation legislation ▪ Medicare expansions: dental, vision, hearing ▪ Drug price negotiation ▪ Medicare Part D benefit design ▪ Immunosuppressant drugs What Types of Products About Health Care Does CBO Create?
  • 14. 13 The Budget and Economic Outlook: 2023 to 2033 (February 2023), www.cbo.gov/publication/58848. The Demographic Outlook: 2023 to 2053 (January 2023), www.cbo.gov/publication/58612. The 2022 Long-Term Budget Outlook (July 2022), www.cbo.gov/publication/57971. Federal Subsidies for Health Insurance Coverage for People Under 65: 2022 to 2032 (June 2022), www.cbo.gov/publication/57962. More of CBO’s work on health care can be found at www.cbo.gov/topics/health-care. Relevant CBO Publications