I was very pleased to participate last week in the American Enterprise Institute’s World Forum. I spoke on two panels, one about health care policy and one about immigration policy. This blog posting summarizes my comments about health care policy; a blog posting tomorrow will summarize my comments about immigration policy.
I highlighted five aspects of CBO’s projections regarding health care. These are developments that we expect will occur under current law and therefore are important considerations in thinking about possible changes in law.
By “major health care programs,” we mean Medicare, which provides coverage for older and disabled Americans; Medicaid, which provides care for many low-income Americans; the Children’s Health Insurance Program or CHIP, which provides coverage to children in families with slightly higher income; and subsidies provided through insurance exchanges. The figures for spending are “net” of offsetting receipts for Medicare, which are primarily premium payments. In dollar terms, net federal spending for major health care programs in 2013 was about $750 billion; the corresponding figure for 2024 in our projections under current law is more than twice as large, topping $1.6 trillion. Of the nearly $900 billion increase, a little less than half is in Medicare and a little more than half is in Medicaid, CHIP, and exchange subsidies.
That reduction of 26 million in the number of uninsured consists of:
Of the 31 million people who we project will remain uninsured, about one-third will not be eligible for federal subsidies—most because they will be unauthorized immigrants, and some because they live in states that will not expand Medicaid under the ACA and are too poor to be eligible for subsidies in the exchanges. The other two-thirds who we project will remain uninsured will be eligible for Medicaid or exchange subsidies, or will have access to insurance through an employer or the private market, but will choose not to buy insurance.
To be sure, our projections of the sources of insurance coverage are quite uncertain and may evolve over time in response to new evidence or analysis.
That will occur simply because the number of Americans over age 65 will increase by more than a third. By 2024, roughly 60 percent of baby boomers will be over age 65 and receiving Medicare benefits.
The slow growth per beneficiary in the coming decade can be attributed primarily to three factors:
Taking all of those factors together, we project that Medicare spending per beneficiary after adjusting for inflation will grow in the coming decade at an average annual rate of 1.5 percent, compared with 4 percent between 1985 and 2007.
That is partly because, as I noted, the number of beneficiaries of Medicare will rise sharply over the next decade. It is also because the aging of the population will push up spending for Medicaid. Older Medicaid beneficiaries are much more costly than younger ones, on average, because they tend to have greater need for both acute medical care and long-term services and supports, such as nursing home care. As a result, in 2013, only 8 percent of Medicaid beneficiaries were over age 65, but they accounted for about 20 percent of Medicaid’s benefit payments.
Based on those considerations, we project that, of net federal spending for major health care programs in 2024, about three-fifths will finance care for people over age 65, about one-fifth will finance care for people who are blind or disabled, and the remaining one-fifth will finance care for able-bodied nonelderly people.