CBO projects that federal spending on the major health care programs would grow larger than spending in any other category if current laws generally remained unchanged. Spending on those programs would account for 40 percent of federal noninterest spending in 2047, compared with 28 percent today. Two factors explain the projected growth in spending on major health care programs: aging and rising health care costs per person (also known as excess cost growth). Presentation by Keith Hall, CBO Director, to the Council for Affordable Health Coverage and the American Action Forum.

1. Congressional Budget Office
Presentation to the Council for Affordable Health Coverage
and the American Action Forum
November 1, 2017
Keith Hall
Director
For more details, see Congressional Budget Office, The 2017 Long-Term Budget Outlook (March 2017),
www.cbo.gov/publication/52480.
Factors Underlying CBO’s Long-Term Outlook
for Federal Health Care Spending

2. 1CONGRESSIONAL BUDGET OFFICE
Health Care Spending Today

3. 2CONGRESSIONAL BUDGET OFFICE
National Spending for Health Care
0
5
10
15
20
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Percentage of GDP

4. 3CONGRESSIONAL BUDGET OFFICE
National Spending for Health Care, 2015
1
5 6
Medicare

5. 4CONGRESSIONAL BUDGET OFFICE
CBO defines outlays for the major health
care programs as spending for:
 Medicare,
 Medicaid,
 The Children’s Health Insurance Program
(CHIP), and
 Subsidies for health insurance purchased
through the marketplaces established
under the Affordable Care Act and related
spending.

6. 5CONGRESSIONAL BUDGET OFFICE
Net Outlays for Major Health Care Programs in 2017
Medicare 590
Medicaid 385
Health Insurance Subsidies and Related Spending 51
Children's Health Insurance Program 15
_____________
Total 1,041
Billions of Dollars

7. 6CONGRESSIONAL BUDGET OFFICE
Health Care Spending
in the Long Term

8. 7CONGRESSIONAL BUDGET OFFICE
If current laws generally remained
unchanged, CBO projects that federal
spending on the major health care
programs would grow larger than any
other category of spending.

9. 8CONGRESSIONAL BUDGET OFFICE
Spending in the Past and Under CBO’s Extended Baseline
Percentage of Gross Domestic Product

10. 9CONGRESSIONAL BUDGET OFFICE
Spending on the major health care
programs would account for 40 percent of
federal noninterest spending in 2047,
compared with 28 percent today.

11. 10CONGRESSIONAL BUDGET OFFICE
Composition of Federal Noninterest Spending Under
CBO’s Extended Baseline
Percent

12. 11CONGRESSIONAL BUDGET OFFICE
Two factors explain the projected growth
in spending on major health care
programs: aging and rising health care
costs per person (also known as excess
cost growth).

13. 12CONGRESSIONAL BUDGET OFFICE
0.0
0.5
1.0
1.5
2.0
2.5
1985–2014 2018–2027 2028 2047 1988–2014 2018–2027 2028 2047
Medicare and Medicaid Private Health Insurance
Estimated and Projected Rates of Excess Cost Growth in
Spending for Health Care
Percent

14. 13CONGRESSIONAL BUDGET OFFICE
Population, by Age Group
Millions of People

15. 14CONGRESSIONAL BUDGET OFFICE
Projected Spending Growth in the Major Health Care
Programs
Percentage of Gross Domestic Product

16. 15CONGRESSIONAL BUDGET OFFICE
An Overview of the
Long-Term Budget Outlook

17. 16CONGRESSIONAL BUDGET OFFICE
If current laws governing taxes and
spending did not change, the condition of
the federal budget would worsen
considerably over the next three decades.

18. 17CONGRESSIONAL BUDGET OFFICE
Federal Spending and Revenues
Percentage of Gross Domestic Product
Actual Projected

19. 18CONGRESSIONAL BUDGET OFFICE
As a result, debt would grow larger in
relation to the economy than ever
recorded in U.S. history.

20. 19CONGRESSIONAL BUDGET OFFICE
Federal Debt Held by the Public
Percentage of Gross Domestic Product

21. 20CONGRESSIONAL BUDGET OFFICE
Uncertainty in the
Long-Term Projections

22. 21CONGRESSIONAL BUDGET OFFICE
Excess cost growth is a significant driver of
future debt and an important source of
uncertainty in CBO’s projections.

23. 22CONGRESSIONAL BUDGET OFFICE
Excess Cost Growth Rates for Federal Spending on
Medicare and Medicaid (30-Year Average)
0
1
2
3
2005 2010 2015 2020 2025 2030 2035 2040 2045
Last Year of the 30-Year Average
Actual Projected
1.1 (Extended Baseline)
0.1 (Lower Rate)
2.1 (Higher Rate)

24. 23CONGRESSIONAL BUDGET OFFICE
Federal Debt Given Different Rates of Excess Cost Growth
for Federal Spending on Medicare and Medicaid
Percentage of Gross Domestic Product
0
50
100
150
200
250
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045
206
150
109
Actual Projected Given Rates
1 Percentage Point
Higher
Extended Baseline,
With Excess Cost
Growth of 1 Percent
in 2047
Given Rates
1 Percentage
Point Lower

25. 24CONGRESSIONAL BUDGET OFFICE
This presentation will be available on
CBO’s website, www.cbo.gov.