Federal Subsidies for Health Insurance Coverage for People Under 65: 2020 to 2030
CBO and JCT project that federal subsidies, taxes, and penalties associated with health insurance coverage for people under age 65 will result in a net subsidy from the federal government of $920 billion in 2021 and $1.4 trillion in 2030.
The federal government subsidizes health insurance for most Americans under age 65 through various programs and tax provisions. This report describes updated baseline projections by the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) of the federal costs associated with each kind of subsidy and the number of people with different types of health insurance. Those projections incorporate an assumption that current laws governing health insurance coverage and federal subsidies for that coverage remain in place.
Federal Subsidies. In CBO and JCT’s projections, net federal subsidies (that is, the cost of all the subsidies minus the taxes and penalties) in 2021 for insured people are $920 billion, or 4.4 percent of gross domestic product (GDP). In 2030, that annual amount is projected to reach $1.4 trillion, also 4.4 percent of GDP. Over the 2021–2030 period, subsidies are projected to total $10.8 trillion.
Medicaid and the Children’s Health Insurance Program (CHIP) account for about 45 percent of the federal subsidies annually during the period;
Subsidies for employment-based coverage, about 35 percent;
Payments for Medicare, about 15 percent; and
Subsidies for coverage obtained through the marketplaces established by the Affordable Care Act or through the Basic Health Program, about 5 percent.
Health Insurance Coverage. In an average month each year during that period, between 238 million and 241 million people are projected to have health insurance, mostly from employment-based plans. Between 31 million and 32 million people are projected to be uninsured.
Effects of the Pandemic. Since CBO last issued baseline projections, in March 2020, the coronavirus pandemic has disrupted the economy, and millions of jobs have been lost. In the projections for the next few years, the loss of employment has these effects:
It decreases estimated enrollment in and subsidies for employment-based insurance;
It increases estimated enrollment in and subsidies for Medicaid and CHIP; and
It increases, on net, the number of people estimated to be uninsured.
Legislative responses to the pandemic have, among other things, temporarily increased the share of Medicaid and CHIP costs paid by the federal government, allowed Medicaid and CHIP enrollees to remain enrolled through the end of the public health emergency regardless of changes in income, and provided forgivable loans and tax credits to businesses to help them retain employees. By CBO and JCT’s estimates, those laws have increased enrollment in Medicaid, as well as the average cost of Medicaid, and lessened the decline in employment-based insurance.
Compared with the March 2020 estimates, current projections show about 1 million more people uninsured in 2021, largely reflecting the effects of the pandemic.