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Health Care

Growth in spending on health care programs is one of the central fiscal challenges facing the federal government. Health care spending per person has grown faster than the nation's economic output per person by about 1 1/2 percentage points per year, on average, for the past few decades. This rapid growth poses a challenge for federal health care programs like Medicare and Medicaid, and also for state and local governments and for the private sector. CBO devotes a large share of its resources to studying proposals that would make narrow or broad changes in the nation's systems for delivering and financing health care.

Sub-Topics:

Medicare
Medicaid and CHIP
Affordable Care Act
Private Health Insurance
Public Health and Preparedness

blog post

Raising the Ages of Eligibility for Medicare and Social Security

report

January 10, 2012

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Highlights

Raising the ages at which people can collect Medicare and Social Security would reduce federal spending and increase federal revenues by inducing some people to work longer. However, raising the eligibility ages for those programs also would reduce people's lifetime Social Security benefits and cause many of the people who would otherwise have enrolled in Medicare to face higher premiums for health insurance, higher out-of-pocket costs for health care, or both. This issue brief reviews how ages of eligibility affect beneficiaries under current law and how delaying eligibility would affect beneficiaries, the federal budget, and the economy.

Among CBO's findings:

Policy Option	Long-Term Budget Impact	Implications for Beneficiaries
Raise the Medicare eligibility age from 65 to 67	Medicare spending declines by about 5 percent	Access to Medicare would be delayed for most people; many of the affected people would pay more for health care
Raise the full retirement age for Social Security from 67 to 70	Social Security spending declines by about 13 percent	People would face reduced benefits over a lifetime
Raise the early eligibility age for Social Security from 62 to 64	Social Security spending changes little	Access to Social Security benefits would be delayed for many people, but their monthly benefit amounts would increase

By inducing people to work longer, raising any of the ages of eligibility would increase the size of the workforce and the economy. Although the magnitude of those effects is difficult to predict, CBO estimates that:

Raising Social Security's early eligibility age to 64 or the full retirement age to 70 would, in the long term, boost the size of the workforce and the economy by slightly more than 1 percent.
Raising Medicare's eligibility age to 67 would also boost the size of the workforce and the economy, but by a much smaller amount.

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Raising the Ages of Eligibility for Medicare and Social Security

blog post

January 10, 2012

H.R. 1173, Fiscal Responsibility and Retirement Security Act of 2011

cost estimate

December 2, 2011

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Spending Patterns for Prescription Drugs Under Medicare Part D

blog post

December 1, 2011

blog post

Spending Patterns for Prescription Drugs Under Medicare Part D

report

December 1, 2011

read complete document (pdf, 697 kb)

Highlights

The centerpiece of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare Modernization Act) was the creation of Medicare Part D, a subsidized pharmaceutical benefit that went into effect in 2006. That additional coverage—which provides outpatient prescription drug insurance to seniors and to people under age 65 with certain disabilities—constituted the most substantial expansion of the Medicare program since its inception in 1965. In 2010, the federal government spent $62.0 billion on Part D, representing 12 percent of total federal spending for Medicare that year.

Under Medicare Part D, all enrollees receive a subsidy for prescription drug insurance; an additional low-income subsidy (LIS) is available to enrollees with sufficiently low income and assets. (In this issue brief, Part D enrollees who receive the LIS benefit are referred to as LIS enrollees; all others are referred to as non-LIS enrollees.) Enrollees in Part D choose a prescription drug insurance plan from a number of competing private plan sponsors. Total spending on Part D drugs equals the sum of spending by all payers combined, including plan sponsors, beneficiaries, the federal government, and third-party payers; in this brief, it is measured on a per-beneficiary basis. In 2008—the most recent year for which data were available when the Congressional Budget Office (CBO) undertook this analysis—average spending for non-LIS enrollees was $1,800. The amount of spending varied widely across enrollees in that category: for 7 percent, no spending occurred, whereas for 6 percent, the amount was at least $5,000. Enrollees who spent more tended to fill more prescriptions and more-expensive prescriptions. The federal government covered roughly 40 percent of non-LIS spending through premium subsidies, and beneficiaries covered most of the remainder through premium payments and out-of-pocket spending.

Average spending for LIS enrollees in 2008 was $3,600, double the spending for non-LIS enrollees. A slightly larger share of LIS enrollees (9 percent) had no Part D spending, but a much greater share 23 percent) had spending of at least $5,000. As with the non-LIS population, higher spending among LIS enrollees was driven by beneficiaries who filled more prescriptions and who filled more-expensive prescriptions. The higher spending among LIS beneficiaries most likely reflected that group's generally poorer health status and the more generous coverage available through the low-income subsidy. Because of that additional subsidy, the federal government covered 95 percent of LIS spending in 2008.

This issue brief reviews patterns of Medicare Part D utilization and spending among the non-LIS and LIS populations. Other important topics relating to Part D, such as the provision of public benefits by sponsors of private plans and competition among those sponsors, are beyond the scope of this analysis.

S. 1931, Temporary Tax Holiday and Government Reduction Act

cost estimate

December 1, 2011

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blog post

CBO's Use of Evidence in Analysis of Budget and Economic Policies

presentation

November 3, 2011

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Presentation at APPAM's Annual Fall Research Conference

blog post

November 3, 2011

The Impact of Hospital Mergers on Treatment Intensity and Health Outcomes

working paper

October 6, 2011

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The CLASS Long-Term Care Insurance Program

blog post

October 17, 2011

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