health care and the federal budget

Congressional Budget Office

2015 Health Care Forecast Conference University of California, Irvine

February 19, 2015

James Baumgardner Deputy Assistant Director

Health Care and the Federal Budget

1 C O N G R E S S I O N A L B U D G E T O F F I C E

Analysis of Premium Support Options

2 C O N G R E S S I O N A L B U D G E T O F F I C E

Key Operations Under the Illustrative Second-Lowest-Bid Option for Premium Support

3 C O N G R E S S I O N A L B U D G E T O F F I C E

Key Operations Under the Illustrative Second-Lowest-Bid Option for Premium Support (Continued)

4 C O N G R E S S I O N A L B U D G E T O F F I C E

Effects of Options on Spending for Medicare Benefits

5 C O N G R E S S I O N A L B U D G E T O F F I C E

Average Annual Premiums Charged by Plans for Medicare Part A and B Benefits Under Illustrative Premium Support Options, by Fee-for-Service Spending in a Region, Weighted by Population, 2020

Dollars

6 C O N G R E S S I O N A L B U D G E T O F F I C E

The Ten-Year Budget Outlook

7 C O N G R E S S I O N A L B U D G E T O F F I C E

CBO’s Baseline Budget Projections, in Billions of Dollars

Total Actual, 2016- 2016-

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2020 2025

Revenues 3,021 3,189 3,460 3,588 3,715 3,865 4,025 4,204 4,389 4,591 4,804 5,029 18,652 41,670

Outlays 3,504 3,656 3,926 4,076 4,255 4,517 4,765 5,018 5,337 5,544 5,754 6,117 21,540 49,310 ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ _______________ _______________ _______________

Deficit -483 -468 -467 -489 -540 -652 -739 -814 -948 -953 -951 -1,088 -2,887 -7,641

Debt Held by the Public at the End of the Year 12,779 13,359 13,905 14,466 15,068 15,782 16,580 17,451 18,453 19,458 20,463 21,605 n.a. n.a.

Note: n.a. = not applicable.

8 C O N G R E S S I O N A L B U D G E T O F F I C E

CBO’s Baseline Budget Projections, as a Percentage of Gross Domestic Product

Total Actual, 2016- 2016-

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2020 2025

Revenues 17.5 17.7 18.4 18.2 18.1 18.1 18.0 18.1 18.1 18.2 18.2 18.3 18.1 18.2

Outlays 20.3 20.3 20.8 20.7 20.7 21.1 21.4 21.6 22.0 21.9 21.8 22.3 21.0 21.5 ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ ____________ _____________ _____________ _____________

Deficit -2.8 -2.6 -2.5 -2.5 -2.6 -3.0 -3.3 -3.5 -3.9 -3.8 -3.6 -4.0 -2.8 -3.3

Debt Held by the Public at the End of the Year 74.1 74.2 73.8 73.4 73.3 73.7 74.3 75.0 76.1 76.9 77.7 78.7 n.a. n.a.

Note: n.a. = not applicable.

9 C O N G R E S S I O N A L B U D G E T O F F I C E

Components of the Total Increase in Outlays in CBO’s Baseline Between 2015 and 2025

Total Increase in Outlays:$2.5 Trillion

All Other Programs(16%)

Net Interest(24%)

Social Security(28%)

Major Health CarePrograms

(32%)

10 C O N G R E S S I O N A L B U D G E T O F F I C E

Deficit Under Selected Alternatives

0

200

400

600

800

1,000

1,200

1,400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billions of Dollars

Baseline

11 C O N G R E S S I O N A L B U D G E T O F F I C E

Deficit Under Selected Alternatives (Continued)

0

200

400

600

800

1,000

1,200

1,400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billions of Dollars

Reduce the Number of Troops Deployed Overseas

Baseline

12 C O N G R E S S I O N A L B U D G E T O F F I C E

Deficit Under Selected Alternatives (Continued)

0

200

400

600

800

1,000

1,200

1,400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billions of Dollars

Increase Discretionary Appropriations at Inflation Baseline

13 C O N G R E S S I O N A L B U D G E T O F F I C E

Deficit Under Selected Alternatives (Continued)

0

200

400

600

800

1,000

1,200

1,400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billions of Dollars

Maintain Medicare Physician Payment at Current Rates Baseline

14 C O N G R E S S I O N A L B U D G E T O F F I C E

Deficit Under Selected Alternatives (Continued)

0

200

400

600

800

1,000

1,200

1,400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billions of Dollars

Prevent Automatic Spending Reductions of the Budget Control Act Baseline

15 C O N G R E S S I O N A L B U D G E T O F F I C E

Deficit Under Selected Alternatives (Continued)

0

200

400

600

800

1,000

1,200

1,400

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Billions of Dollars

Extend Expiring Tax Provisions

Baseline

16 C O N G R E S S I O N A L B U D G E T O F F I C E

The Labor Force, Employment, and Unemployment

Percentage of the Population

17 C O N G R E S S I O N A L B U D G E T O F F I C E

Interest Rates on Treasury Securities

Percent

18 C O N G R E S S I O N A L B U D G E T O F F I C E

Effects of the Affordable Care Act on Health Insurance Coverage, 2025

Millions of Nonelderly People

Current LawWithout the ACA

Exchanges

Medicaid and CHIP

Employment-Based

Nongroup and Other-4

-9

+16

Insured

Uninsured

-27

+24

0

50

100

150

200

250

300

0204060

19 C O N G R E S S I O N A L B U D G E T O F F I C E

The Long-Term Budget Outlook

20 C O N G R E S S I O N A L B U D G E T O F F I C E

Federal Debt Held by the Public

21 C O N G R E S S I O N A L B U D G E T O F F I C E

Number of People Age 65 or Older, by Age Group

1999 2004 2009 2014 2019 2024 2029 2034 20390

10

20

30

40

50

60

70

80

90

65 to 74

75 to 84

85 to 94

95 or OlderActual Projected

Millions of People

22 C O N G R E S S I O N A L B U D G E T O F F I C E

Federal Spending on the Major Health Care Programs, by Category

1999 2004 2009 2014 2019 2024 2029 2034 20390

1

2

3

4

5

6

7

8

Medicare

Medicaid, CHIP, and Exchange Subsidies

Percentage of Gross Domestic Product

Actual Extended Baseline Projection

23 C O N G R E S S I O N A L B U D G E T O F F I C E

Debt Held by the Public, Total Spending, and Total Revenues

24 C O N G R E S S I O N A L B U D G E T O F F I C E

Components of Total Spending

25 C O N G R E S S I O N A L B U D G E T O F F I C E

Components of Total Revenues

26 C O N G R E S S I O N A L B U D G E T O F F I C E

Federal Debt Given Different Rates of Growth of Federal Health Care Spending

1999 2004 2009 2014 2019 2024 2029 2034 20390

50

100

150

Extended BaselineWith EconomicFeedback

93

111

Higher Growth Rate132

Lower Growth Rate

Actual Projected

Percentage of Gross Domestic Product

27 C O N G R E S S I O N A L B U D G E T O F F I C E

Federal Debt Given Different Rates of Mortality Decline, Productivity Growth, Interest, and Growth of Federal Health Care Spending

1999 2004 2009 2014 2019 2024 2029 2034 20390

50

100

150

Extended Baseline WithEconomic Feedback

75

111

All Four Factors RaiseProjected Deficits159

All Four Factors LowerProjected Deficits

Percentage of Gross Domestic Product

Actual Projected

28 C O N G R E S S I O N A L B U D G E T O F F I C E

The Timing and Size of Policy Changes Needed to Make Federal Debt Meet Two Goals

2025

2020

2015

0 1 2 3 4 5Percentage of GDP

1.2

2.6

1.5

3.2

2.1

4.3

If actionbeginsin . . .

Its average percentage of GDPduring the past 40 years (39 percent)

Its current percentage ofGDP (74 percent)

The annual reduction in noninterest spending orincrease in revenues would need to be thispercentage of GDP. . .

To make federal debt held bythe public in 2039 equal . . .

29 C O N G R E S S I O N A L B U D G E T O F F I C E

Notes

Slides 2 through 5: For more information, see A Premium Support System for Medicare: Analysis of Illustrative Options (September 2013), www.cbo.gov/publication/44581.

Slides 7 through 13: For more information, see The Budget and Economic Outlook: 2015 to 2025 (January 2015), www.cbo.gov/publication/49892.

Slides 15 through 23: For more information, see The 2014 Long-Term Budget Outlook (July 2014), www.cbo.gov/publication/45471. CBO’s long-term projections were most recently published in July 2014; they generally reflect current law, following the agency’s April 2014 baseline budget projections through 2024 and then extending the baseline concept into later years.