CBO: Healthcare Is the Budget Monster
| 2 Comments |

Another year, another budget outlook.

The Congressional Budget Office just released their updated projections for how the economy and the federal budget will change over the next 11 years (2013-2023). Buried deep in the numbers is a slight (but not insignificant) increase in the total cost of the Affordable Care Act - from $1.165 trillion in a previous forecast, to $1.329 trillion projected now. The CBO credits a number of factors with this increased cost, mostly stemming from changes in insurance enrollment.

However, and this is important, the new cost projection is for the years 2013-2023 whereas the August 2012 baseline looked at 2012-2022. The cost projections for that period are virtually unchanged - however the internal numbers look a little different now.

Changes in Insurance Enrollment (in millions of people) - CBO Table A-2

 

Aug 2012

Feb 2013

Difference

Medicaid

11

12

1

Employment-based

-4

-7

-4

Nongroup

-3

-4

-1

Exchanges

25

26

(n/a)

Uninsured

-30

-27

4

 

Note: The above table indicates changes in enrollment rather than absolute numbers. For instance, the August 2012 uninsured number should be read as "30 million fewer uninsured over the forecast period" whereas the February 2013 number should be read as "27 million fewer uninsured over the forecast period." Some of the numbers in the "difference" column don't add up; this is because CBO offers a range of estimates (from -500,000 to +500,000) and rounds off the numbers.

One of the biggest shifts that will occur is that 4 million more people will lose employer-based coverage, as more employers will choose to pay the penalty instead, coming out to 7 million total that will lose coverage - that's 7 million that will be unable to keep their coverage even though they like it, despite the President's campaign promises. Some of these people may be able to get coverage through exchanges while others will remain uninsured and pay the penalty. When all is said and done, however, the projections for uninsured come 2022 is now 4 million greater.

But what else is buried in the economic forecast? For one, we know that continuing the "doc fix" where Medicare's payment cuts to physicians are constantly delayed will cost $167 billion (including debt service) from 2014-23.

The CBO makes a bigger point however - one that addresses the unsustainable course of federal healthcare spending. As a percentage of GDP, federal healthcare spending will increase from just under five percent now, to over six percent come 2023.

projected_spending.png

This doesn't even factor in the growth in net interest payments (which are heavily driven by increases in healthcare spending. In turn, spending on other programs (including defense) will wind down to less than three percent of GDP over 11 years. So, anyone that tells you we don't have a spending problem is being less than disingenuous - federal healthcare spending is, and will continue to, be the monster that crowds out all other spending; and Obamacare does not slow the growth.

2 Comments

Any idea of CBO interest rate assumption? We all know HC is expensive but I fear what would happen if interest rates "were real" (ie, set my market NOT by Ben)

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