Federal Health Care Spending to Reach 8 Percent of GDP in 2038, CBO Estimates

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By Steve Teske  

Sept. 17 --Federal health care spending on the government's major health programs will reach 8 percent of the nation's gross domestic product in 2038, up from 4.6 percent in 2013, the Congressional Budget Office said Sept. 17 in its annual long-term budget outlook report.

CBO acknowledged that the rate of Medicare and Medicaid spending increases have slowed in recent years, although the exact reasons remain vague. But it said the increase in federal spending on health care in the next 25 years will be tied to a sharp rise in the number of people receiving benefits.

Driving this will be the aging of the population and subsequent rise in Medicare enrollment, and availability of subsidies to help individuals purchase health insurance in the health care marketplaces under the Affordable Care Act, as well as Medicaid enrollment increases under the ACA, CBO said.

Over the next 25 years, aging will account for 35 percent of the spending growing in federal health programs relative to the GDP; excessive cost growth will account for 40 percent, while the federal subsidies will account for 26 percent, the report estimated.

CBO examined spending for Medicare, Medicaid, the ACA, and the Children's Health Insurance Program.

National health care spending, including all public and private sources, is expected to reach 22 percent of GDP by 2038, up from 16.4 percent in 2011, CBO said.

Mounting Pressure

CBO said health care spending can't continue to rise faster than the increase in the GDP every year because it eventually would consume too much of individuals' incomes, restraining the consumption of other goods and services. Instead, there likely will be “mounting pressure” to slow health care cost growth, the report said.

CBO said the private sector will try to limit cost increases by, for example, working with insurers to make health care delivery more efficient, by limiting the amount of coverage offered or by offering a fixed contribution with which to purchase coverage in the marketplace.

State governments also may lower rates paid to providers under Medicaid and CHIP, limiting services they cover, or tightening eligibility requirements, CBO said.

Medicare spending may slow due to changes in the overall health care system that encourage more efficient delivery of care, and due to provisions contained in the ACA, such as initiatives launched by the Center for Medicare & Medicaid Innovation, the report said.


To contact the reporter on this story: Steve Teske in Washington at steske@bna.com

To contact the editor responsible for this story: Brian Broderick at bbroderick@bna.com

The report is available at http://www.cbo.gov/sites/default/files/cbofiles/attachments/44521-LTBO_0.pdf.

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