CBO Projects ACA Will Set Fed Back $1.2 Trillion Over Next Decade

 

If the laws currently governing federal spending remain in place, the federal budget deficit will total $486 billion in 2015, according to a Congressional Budget Office (CBO) report which made projections for the federal budget over the next decade. The CBO estimates that the deficit will decline in 2016 to $455 billion and hold steady through 2018. However, by 2025, the deficit is expected to grow to $1 trillion. Notably, the deficit for 2018 outpaces CBO’s earlier projections by $18 billion, in large part because the CBO increased its estimates for the outlays on Medicare and Medicaid. In contrast, the CBO’s projected deficits for the 2016 to 2025 period are $431 billion less than previously estimated due to a “downward revision to projected growth in private health insurance spending,” which the CBO attributes to the Patient Protection and Affordable Care Act (ACA). The CBO projects that the major provisions of the ACA will result in costs to the federal government of $1,207 billion over the 2016 to 2025 period.

Mandatory spending. A significant portion of the increase in federal outlays between 2015 and 2025 is attributed to mandatory spending. Specifically, over that period, the CBO projects that mandatory spending will rise 1.4 percent. According to the CBO, “mandatory spending consists mostly of outlays for Social Security and the federal government’s major health care programs—Medicare, Medicaid, the Children’s Health Insurance Program [CHIP], and subsidies for health insurance purchased through exchanges (and related spending).”

Health care. Spending on major health care programs is projected to see an increase moving beyond 2015. The CBO estimates that spending on major health care programs will represent 6.1 percent of the gross domestic product (GDP) in 2025, which is a full percentage point higher than the current percentage of the GDP allocated to major health care programs. As compared to the CBO’s January 2015 report setting a baseline for budget projections for 2015 to 2025, the CBO reduced projected outlays for Health Insurance Exchange subsidies by $209 billion for the 2016 to 2025 period. The reduction is related to newer estimates that anticipate lower premiums and slightly lower enrollment through the Exchanges than the CBO had projected. As compared to CBO’s earlier projection, the Medicaid spending estimate has been increased by $8 billion for 2015 and reduced for 2016 to 2025 by $59 billion. The long term reduction is premised on the CBO’s estimate that fewer people will enroll in Medicaid because of the ACA.

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