This presentation explains how much the federal government spends on the major health care programs: Medicare, Medicaid, the Children’s Health Insurance Program, and marketplace subsidies and related expenditures. In 2018, about 155 million people were enrolled in those programs. CBO projects that net outlays for the programs will grow from about $1.0 trillion in 2018 to about $2.0 trillion in 2028. Presentation by Jessica Banthin, Deputy Assistant Director in CBO’s Health, Retirement, and Long-Term Analysis Division, at the Alliance for Health Policy Summit on Health Care Costs in America.

1. Congressional Budget Office
Alliance for Health Policy Summit
on Health Care Costs in America
May 24, 2018
Jessica Banthin
Deputy Assistant Director, Health, Retirement, and Long-Term
Analysis Division
Projections of Federal Spending
on Major Health Care Programs
For details about the projections shown in this presentation, see Congressional Budget Office, The Budget and Economic Outlook:
2018 to 2028 (April 2018), www.cbo.gov/publication/53651, and Federal Subsidies for Health Insurance Coverage for People Under
Age 65: 2018 to 2028 (May 2018), www.cbo.gov/publication/53826.

2. 1
CBO
How much does the
federal government spend
on major health care
programs?

3. 2
CBO
CBO defines outlays for the major
health care programs as spending for:
• Medicare,
• Medicaid and the Children’s Health
Insurance Program (CHIP), and
• Marketplace subsidies and related
spending.

4. 3
CBO
Those programs make up more than
40 percent of mandatory spending in
the federal budget.
Mandatory spending is governed by
statutory criteria, such as program
eligibility rules, and is not normally
constrained by the annual appropriation
process.
Combined, those programs enroll about
155 million people in 2018 and are
projected to enroll 176 million people in
2028.a
a. Enrollment estimates include people more than once if they are enrolled in more than one program, such as Medicare and
Medicaid.

5. 4
CBO
a. Consists of mandatory spending on Medicare net of premiums and other offsetting receipts.
Net Outlays for Major Health Care
Programs in 2018
Medicarea 583
Medicaid and CHIP 399
Marketplace Subsidies and Related Spending 55
____________
Total 1,037
Billions of Dollars

6. 5
CBO
CBO develops baseline projections
under the assumption that current laws
governing spending and revenues will
generally not change in the future.
The projections are not intended to be a
prediction of the future. Rather, they
serve as a benchmark against which
the effects of possible changes in law
can be measured.

7. 6
CBO
a. Consists of mandatory spending on Medicare net of premiums and other offsetting receipts.
Net Outlays for Major Health Care
Programs in 2028
Medicarea 1,260
Medicaid and CHIP 674
Marketplace Subsidies and Related Spending 89
____________
Total 2,020
Billions of Dollars

8. 7
CBO
Net Outlays for Major Health Care
Programs, 2018–2028
Average
Annual
Growth,
2018–2028:
6.3%
0
500
1,000
1,500
2,000
2,500
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Billions of
Dollars

9. 8
CBO
What are the drivers of
cost growth in the major
health care programs?

10. 9
CBO
Health care cost growth can be
attributed to two main factors.
First, older people use more health
care, and the number of people age
65 or older in the population has been
growing significantly. It has more than
doubled over the past 50 years and is
expected to rise by more than one-third
by 2028.
Second, health care costs per person
(adjusted to account for the aging of the
population) are projected to grow more
quickly than the economy over the long
term.

11. 10
CBO
Growth in health care spending has
slowed in recent years, but the reasons
for that slowdown are not clear.
In CBO’s projections, spending per
enrollee in federal health care programs
grows more rapidly over the coming
decade than it has in recent years—at
about 5 to 6 percent per year, on
average.
But it does not return to the higher rates
of growth that were experienced before
the slowdown. For example, spending
per enrollee grew about 8 percent per
year between 1980 and 2005 in the
Medicare fee-for-service program.

12. 11
CBO
0
200
400
600
800
1,000
1,200
1,400
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Billions of
Dollars
Average
Annual
Growth,
2018–2028:
7.3%
Net Mandatory Outlays for Medicare,
2018–2028

13. 12
CBO
Over the 2018–2028 period, net
Medicare outlays are projected to
increase by an average of 7 percent per
year.
Spending growth per enrollee accounts
for nearly 5 percentage points of that
increase, and growing enrollment
accounts for the rest.

14. 13
CBO
Outlays for Medicaid and CHIP,
2018–2028
Average
Annual
Growth,
2018–2028:
4.8%
0
100
200
300
400
500
600
700
800
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Billions of
Dollars

15. 14
CBO
After 2018, outlays for Medicaid and
CHIP are projected to grow at an
average rate of about 5 percent per
year.
Medicaid grows by about 5.5 percent
per year. Nearly 5 percentage points
are the result of growth in per-enrollee
costs that is close to the historical rate,
and about 1 percentage point is due to
increasing enrollment.
CHIP is slightly different, because a
change in the federal matching rate
causes federal outlays to fall and then
rise slowly over the next 10 years.

16. 15
CBO
Marketplace Subsidies and Related
Spending, 2018–2028
Average
Annual
Growth,
2018–2028:
4.5%
0
10
20
30
40
50
60
70
80
90
100
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Billions of
Dollars

17. 16
CBO
Subsidies for insurance obtained
through the marketplaces and outlays
for the Basic Health Program are
projected to grow because of increases
in costs per enrollee. The number of
people who purchase such coverage is
projected to decline.
Combined, such subsidies are
projected to average $6,300 per
subsidized enrollee in calendar year
2018 and to rise to about $12,450 in
2028.

18. 17
CBO
How does health care cost
growth affect the federal
budget over time?

19. 18
CBO
Cost growth in the major health care
programs may crowd out spending in
other programs, add pressure to
increase revenues, or raise budget
deficits.
Cost growth that exceeds growth in the
economy (measured as growth in gross
domestic product, or GDP) can be more
difficult to support over time.

20. 19
CBO
Net Outlays for Major Health Care Programs
as a Percentage of GDP, 2018–2028
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Percentage of
GDP

21. 20
CBO
As of 2018, outlays for the major health
care programs exceed outlays for
Social Security.
Together, spending for Social Security
and the major health care programs is
projected to rise by almost 3 percent of
GDP between 2018 and 2028.

22. 21
CBO
a. Consists of spending on Medicare (net of premiums and other offsetting receipts), Medicaid, and the Children’s Health Insurance
Program as well as outlays to subsidize health insurance purchased through the marketplaces established under the Affordable Care
Act and related spending.
Outlays for Social Security and Major
Health Care Programs
Percentage
of GDP

23. 22
CBO
By 2028, spending on major health care
programs is projected to represent
almost 30 percent of federal spending.
And spending for those programs,
together with outlays for Social Security,
would account for more than half of all
federal spending.

24. 23
CBO
Total Outlays
Percentage
of GDP