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Latest CBO Projections

By February 1, 2016Commentary

The Congressional Budget Office regularly updates projections for the nation’s financial state looking out ten years.  The recently released report includes information on health spending that should concern us all.  (CBO Report)   At a high level, we should note that we have not been close to a budget surplus for a long time; and in 2016 and future years the annual deficit is projected to grow as a percent of GDP, and our total debt burden continues to rise to alarming levels.  The CBO included its usual warning about the negative economic effects of very large federal debt, which include reductions to wage and job growth, less flexibility to respond to economic downturns and an outright increase in the risk of financial crises.  Congress recently abandoned spending and revenue discipline in a cowardly compromise that exacerbated our financial problems.  Health spending is an overweight contributor to our excessive spending.  The CBO projects that federal health spending, primarily Medicare, Medicaid and children’s health insurance programs, will be over $100 billion higher in 2016 than in 2015 and will continue rising at a very rapid pace.  In 2015 that spending was about $1 trillion, by 2026 CBO says it will be at least $2 trillion.

It is also worth noting that CBO now is projecting far less enrollment in individual health plans sold through the insurance exchanges, 8 million fewer people in fact, which saves some money on subsidies, but also points out once again what a farce the Administration’s rationales for enacting the reform law were and what a poor job CBO did of giving Congress more realistic projections on the effect of the law.  And the Report finds that the reform law dampens economic growth and employment by discouraging people from working.  On the other hand the free health care offered by Medicaid is booming, greatly worsening both the federal deficit and state budget problems.  I have no fear in suggesting that we are going to see very significant Medicaid eligibility and benefit cutbacks in the next few years.  There will be no choice.  CBO is projecting somewhat significant economic growth over the period 2016-2026, but its projections in the last few years have overshot actual economic growth.  No reason to think they aren’t continuing to make the same mistake and slower economic growth means less government revenue.  Every American should be familiar with these projections and should be thinking about their significance.  Very, very few are, which is one of our biggest problems.  And it continues to be apparent that we really are heading for, if not in the midst of, a health spending crisis, which sooner or later will require drastic action which affects many people’s lives.  Sooner is always better, but is much harder.

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