CBO’s Latest Projections Related to Health Insurance Costs

By April 5, 2016 Commentary

The federal government spends a fair amount of money on health care coverage, both directly, through Medicare, Medicaid, FEHBP, the VA, TriCare, subsidies for the health exchange customers, etc., and indirectly, primarily by health insurance tax deductions, exemptions and credits.  The Congressional Budget Office has issued a new report summarizing this spending in regard to people under 65 and examining trends and the effects of the reform law implementation.   (CBO Paper)    The total federal net cost for this group is around $600 billion in 2016, rising to $1.1 trillion in 2026.  Over the ten-year period, the net cost is $8.9 trillion.  43% goes to Medicaid, about 41% for employment-based insurance subsidies, mostly the exclusion of premium payments from income.

CBO estimates that 244 million under 65 Americans will have health insurance in 2016 and 27 million, or a little over 10%, won’t.  Looks like that reform law didn’t quite meet what we were promised–basically no uninsured.  And in ten years, CBO is projecting there will still be 10% uninsured.  In 2016, the reform law is estimated to reduce the number of uninsured by 22 million people, compared to what it would have been without the law.  The net cost of this reduction is $110 billion, or $5000 a person.   Here is the most depressing thing; CBO’s projection skills don’t seem to be very good and seem to err way low.  Compared to estimates made just last March, CBO now says the reform law’s insurance provisions will cost $136 billion more in the period 2016 to 2025, mostly because of more people enrolling under the Medicaid expansion.  Compared to the very original projection made in 2010, just before passage, however, the current estimate is lower by $157 billion, but that is because not all states accepted the Medicaid expansion and exchange enrollment is lower than estimated at that time.  What is clear is that the federal government, which is running a serious deficit every year, is unlikely to be able to afford all this spending.

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