At a Glance
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.
The estimates presented here are based on the Congressional Budget Office’s economic forecast as of June 26, 2020, and premium forecast as of July 1, 2020, and on an assumption that current laws governing health insurance coverage and federal subsidies for that coverage remain in place. CBO and the staff of the Joint Committee on Taxation (JCT) have endeavored to develop budgetary estimates that are in the middle of the distribution of potential outcomes.
Given the rapidly changing economic environment and the uncertainty surrounding the length and severity of the 2020 coronavirus pandemic, the agencies’ estimates of health insurance coverage and federal subsidies are subject to significant uncertainty. Further, changes in federal laws could affect health insurance markets and federal subsidies for coverage.
Numbers may not add up to totals because of rounding. The sources of all figures in this report may be cited this way: Congressional Budget Office; staff of the Joint Committee on Taxation.
Estimates of health insurance coverage reflect average monthly enrollment during a calendar year and include spouses and dependents covered under family policies. The estimates are for the civilian noninstitutionalized population under age 65, which excludes members of the armed forces on active duty and people in penal or mental institutions or in homes for the elderly or infirm. The majority of individuals over age 65 are covered by Medicare.
Unless the report indicates otherwise, all years referred to in describing estimates of spending and revenues are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end.
Estimates by level of income are calculated using the projected income distribution from CBO’s health insurance model, HISIM2. Income in HISIM2 is based on income reported in the Current Population Survey—with various adjustments to better match tax data—that is then extended over the projection period to be consistent with CBO’s macroeconomic forecast of economic growth and projections of employment.
In most states, the federal poverty level (FPL) is $12,760 for a single person in 2020. For each additional person in a household, $4,480 is added. Income levels reflect modified adjusted gross income (MAGI) for the calendar year. MAGI equals gross income plus untaxed Social Security benefits, foreign earned income that is excluded from adjusted gross income, tax-exempt interest, and the income of dependent filers.
The sum of the estimates of the number of people enrolled in health insurance plans and the number of people who are uninsured exceeds the estimate of the total population under age 65 by between 12 million and 14 million every year of the projection period, because some people (about 5 percent of the insured population) will have multiple sources of coverage. To arrive at the estimates given in this report, CBO and JCT did not assign a primary source of coverage to people who reported multiple sources; the resulting amounts align better with estimates of spending as well as with information about health insurance coverage from household surveys and administrative data. (By contrast, when CBO and JCT have reported changes in the sources of insurance coverage stemming from proposed legislation, the agencies have used only people’s primary source of coverage to count them, an approach that has generally proved more useful for that purpose.)
Under the Affordable Care Act, states have the option to establish a Basic Health Program, which is primarily for people whose income is between 138 percent and 200 percent of the FPL. To subsidize that coverage, the federal government provides states with funding equal to 95 percent of the subsidies for which those people would have been eligible through a marketplace. States can use those funds, in addition to funds from other sources, to offer health insurance that covers a broader set of benefits or requires smaller out-of-pocket payments than coverage in the marketplaces does. Minnesota and New York have created a Basic Health Program.
In 2020, the Centers for Medicare & Medicaid Services made about $100 billion in accelerated and advance payments to certain providers under the Medicare program, and in its September baseline, CBO expects those amounts to be recouped through 2021. CBO has not estimated how much of the accelerated and advance payments was for beneficiaries under age 65. Accordingly, figures for Medicare spending for beneficiaries under age 65 exclude those payments and expected recoupment.
For details about the methods underlying the projections, see Congressional Budget Office, Federal Subsidies for Health Insurance Coverage for People Under 65: 2019 to 2029 (May 2019), www.cbo.gov/publication/55085.
For a discussion of how CBO and JCT project premiums, see Congressional Budget Office, Private Health Insurance Premiums and Federal Policy (February 2016), pp. 9–11, www.cbo.gov/publication/51130.
For a discussion of how CBO and JCT define health insurance coverage and the uninsured population, see Congressional Budget Office, Health Insurance Coverage for People Under Age 65: Definitions and Estimates for 2015 to 2018 (April 2019), www.cbo.gov/publication/55094.
For details about the uninsured population in 2019, see Congressional Budget Office, Who Went Without Health Insurance in 2019, and Why? (forthcoming, September 2020), www.cbo.gov/publication/56504.
Federal Subsidies for Health Insurance Coverage for People Under 65: 2020 to 2030
In a report issued each year, the Congressional Budget Office and the staff of the Joint Committee on Taxation (JCT) provide projections of health insurance coverage for people under age 65 and the federal costs of that coverage for that year and the following decade. Net federal subsidies for that coverage are projected to total $920 billion in 2021 and $1.4 trillion in 2030. Measured as a share of gross domestic product (GDP), the subsidies are an estimated 4.4 percent in both years.
Projected Subsidies for Health Insurance Coverage
For people under 65, the federal government subsidizes health insurance in several ways: by giving tax benefits for employment-based coverage, by providing a majority of funding for Medicaid and the Children’s Health Insurance Program (CHIP) (states provide the remainder), and by offering tax credits to eligible people who purchase coverage through the health insurance marketplaces established by the Affordable Care Act (ACA). The federal government also provides coverage through the Medicare program to people under 65 who receive benefits from the Social Security Disability Insurance program or who have been diagnosed with end-stage renal disease.
Average federal subsidies for health insurance per recipient differ because the people who are eligible for and enrolled in each type of insurance differ by age, health status, income, and disability status; because the federal government subsidizes the coverage to different extents; and because the prices paid to providers differ for different types of coverage.
Federal Health Insurance Subsidies
Billions of Dollars
Percentage of Gross Domestic Product
Average Federal Subsidies for Recipients, by Type of Health Insurance
Projected Private Health Insurance Premiums
Total federal subsidies for employment-based insurance and nongroup coverage depend on total premiums. In the case of employment-based coverage, a person’s contributions toward premiums are excluded from taxable income, so as premiums rise, the subsidy the person receives increases as his or her contribution toward premiums increases—so larger subsidies go to people with higher income. In the case of nongroup coverage, someone who is eligible to receive a subsidy through a marketplace and selects the benchmark plan is required to pay a designated amount of his or her income toward premiums, and the subsidy covers the remainder. (A benchmark plan is the second-lowest-cost silver plan available in the marketplace in any given area.)
CBO and JCT project spending by private health insurers on health care and administration on the basis of trends in premium growth and of projected growth in personal income, which affects people’s ability to buy health insurance.
Between 2020 and 2030, private health insurance spending per enrollee, which is the basis for nongroup and employment-based premiums, is projected to grow by an average of 5 percent per year. In that same period, premiums for benchmark plans used to determine subsidies in the nongroup market are projected to grow by an average of 4 percent per year. Most of the premium growth over time is attributable to the changes in projected health care spending per person.
Annual Percentage Change in Gross Premiums for Benchmark Plans and Private Health Insurance Spending
Projected Health Insurance Coverage
To estimate the net effects that subsidies have on the federal budget, CBO and JCT project the number of people with different types of health insurance coverage. By those estimates, of the 271 million people under age 65 in 2021, 151 million will have coverage through an employer, and close to 32 million will be uninsured. In 2030, when the population is estimated to be the same size, 155 million are projected to have coverage through an employer, and 31 million, to be uninsured. In percentage terms, enrollment in Medicaid and CHIP is estimated to be slightly smaller in 2030 than in 2021, and the portion of the population that will be enrolled in employment-based coverage, slightly larger.
The types of coverage that people enroll in vary substantially depending on their income.
Health Insurance Coverage by Type and Income
Composition of the Uninsured Population
CBO and JCT consider people uninsured if they are not covered by an insurance plan or enrolled in a government program that provides financial protection from major medical risks. Uninsured people receive some types of health care and are often not required to pay the full cost of that care, but they have substantially less access to care and financial protection than do insured people. Uninsured people who are eligible for Medicaid have more financial protection than others because they can enroll at any time—in some cases, as they are seeking care in hospitals or other settings—and may receive coverage retroactively. Some people may be eligible for multiple sources of coverage. To characterize the uninsured population, CBO and JCT classified people who lack insurance into mutually exclusive groups on the basis of the most heavily subsidized option available to them or the primary reason they were ineligible for subsidized coverage.
Composition of the Uninsured Population, 2021
Enrollment in and Spending for Medicaid and CHIP
Medicaid is jointly financed by state governments and the federal government; the federal government pays for roughly 65 percent of the cost of services, on average. Like Medicaid, the Children’s Health Insurance Program (CHIP) is also jointly financed by state governments and the federal government. In that program in 2020, the federal government will pay roughly 80 percent of the cost of services, and from 2021 to 2029, about 70 percent, as higher matching rates established by the ACA and the HEALTHY KIDS Act end.
The Families First Coronavirus Response Act (enacted on March 18, 2020) increased the federal medical assistance percentage, or FMAP (the formula that determines the matching rate for Medicaid), by 6.2 percentage points for the duration of the public health emergency for most enrollees. The law also increased the matching rate for CHIP by about 5 percentage points for the same period. Additionally, the law required states to allow people to remain enrolled in Medicaid and CHIP during that period regardless of changes in their circumstances.
Share of Enrollment in and Spending for Medicaid and CHIP, by Eligibility Category, 2021
Percentage of Total
Effects of Recently Enacted Legislation on Medicaid and CHIP Spending, by Eligibility Category, 2021
Percentage of Total Additional Spending
Effects of Employment Loss on Insurance Coverage in 2020
The coronavirus pandemic has caused major economic disruptions. However, less than 30 percent of job losses in 2020 are projected to also result in a loss of access to employment-based insurance, in large part because those job losses are concentrated among small firms and lower-wage service industries, where health insurance offers are less common, and because many job losses are temporary, with firms allowing workers to retain their offer during the furlough. Among those losing access to employment-based coverage, about one-third are projected to enroll in Medicaid or subsidized nongroup coverage.
CBO and JCT estimate that the full-year-equivalent number of people who have lost or will lose their job—permanently or temporarily—as a result of the pandemic will be 14.3 million for 2020. (That figure is smaller than the number of people who lost jobs at specific points of the year because nearly all of them worked the first few months of 2020, and many will resume work before the year ends.) In the projections, of those 14.3 million people, many did not lose employment-based insurance: 7.1 million (slightly less than 50 percent) did not have an offer of employment-based insurance, and 3.3 million (slightly more than 20 percent) temporarily lost their job but retained an offer of employment-based insurance and their employer’s contributions to premiums while furloughed.
The remaining 3.9 million people (less than 30 percent) permanently have lost or will lose their job in 2020; they had an offer of employment-based insurance through that job that they also lost. (That change in the number of offers to employees differs from the estimates of changes in the numbers of people with employment-based coverage discussed elsewhere in this report for three reasons: not all offers are accepted, some accepted offers that are lost result in a loss of coverage for dependents as well as employees, and some employees who lose coverage through their own job are able to enroll in employment-based coverage through a spouse or parent.)
Employment Loss Due to the Coronavirus Pandemic and Resulting Insurance Coverage, 2020
Millions of People
Changes Since March 2020 in Projections of Subsidies and Sources of Coverage
Since CBO and JCT’s previous projections, in March 2020, the agencies have increased their estimate, for the 2021–2030 period, of the net federal subsidies for health insurance coverage for people under age 65 from $10.7 trillion to $10.8 trillion. The net increase results primarily from including the federal government’s spending on Part D (prescription drugs) of Medicare in the September 2020 estimates to more accurately represent the government’s expenditures for individuals under 65 enrolled in Medicare. Without that change, the current estimate of net federal subsidies would show a reduction from the previous one, reflecting the effects of the coronavirus pandemic, tempered by the legislation enacted in response.
The agencies’ estimates account for the effects of the Coronavirus Aid, Relief, and Economic Security (CARES) Act (enacted on March 27, 2020) and the Paycheck Protection Program and Health Care Enhancement Act (enacted on April 24, 2020), which provided forgivable loans and new tax credits to offset employers’ payroll costs and some of their other expenses.
Since CBO and JCT’s previous estimates in March, the Families First Coronavirus Relief Act (enacted on March 18, 2020) required states to allow people to remain enrolled in Medicaid for the duration of the public health emergency even if their circumstances change, providing them with continuous coverage during that period. During the emergency, states receive higher matching rates from the federal government if they maintain coverage for all Medicaid enrollees regardless of changes in income or circumstances that otherwise would cause them to lose eligibility. In addition, states must not enact stricter eligibility standards, increase Medicaid premiums, or establish any cost sharing for services related to COVID-19, the disease caused by the coronavirus.
Comparison of Estimates of Employment-Based Coverage
Comparison of Estimates for Medicaid and CHIP
Comparison of Estimates for Subsidized Nongroup Coverage and the Basic Health Program
Changes Since March 2020 in Projections of the Number of Uninsured People
Compared with the amounts estimated in March, CBO and JCT’s current estimates of the number of uninsured people—incorporating effects of the pandemic—are about 1 million larger over the next few years. The current estimates reflect decreases in employment-based coverage resulting from job losses as well as increases in enrollment in Medicaid brought about by policy changes that extend the eligibility period for enrollees and declines in income that make more people eligible.
The estimates for 2021 show 1 million more individuals uninsured, for example. That revision is the net result of larger changes in the sources of coverage: 8 million fewer are enrolled in employment-based insurance, 9 million more are enrolled in Medicaid and CHIP, and 2 million more have multiple sources of coverage over the course of the year.
The increase in the number of people with multiple sources of coverage does not change the total number of people estimated to have coverage and explains how the number of uninsured people can increase at the same time the increase in enrollment in Medicaid and CHIP exceeds the decline in employment-based insurance. For example, some people enrolled in Medicaid at the beginning of 2021 continue to be covered by Medicaid but also obtain employment-based coverage later in the year. CBO counts multiple sources of coverage because doing so aligns better with estimates of spending and health insurance coverage as reported on household surveys and administrative data.
Comparison of Estimates of the Number of People Without Insurance
Millions of People
Appendix: Details of the Projections of Health Insurance Coverage and Federal Subsidies
The tables in this appendix show the Congressional Budget Office and the staff of the Joint Committee on Taxation’s previous and current projections of health insurance coverage and federal subsidies for health insurance for each year from 2020 to 2030. For the current projections of health insurance coverage, from September 2020, see Table A-1; for the current projections of federal subsidies for health insurance, see Table A-2. For the previous projections of health insurance coverage, from March 2020, see Table A-3; for the previous projections of federal health insurance subsidies, see Table A-4. For a comparison of the March 2020 and September 2020 projections, see Table A-5.
About This Document
Each year, the Congressional Budget Office issues a series of publications describing its projections of the federal budget. This report provides background information that helps explain some of the projections in the most recent of those publications and also provides updated estimates. In keeping with CBO’s mandate to provide objective, impartial analysis, the report makes no recommendations.
Kevin McNellis (formerly of CBO), Carolyn Ugolino and Emily Vreeland prepared the report. Alice Burns, Katherine Feinerman, Stuart Hammond, Caroline Hanson, Zhuang Hao, Keren Hendel (formerly of CBO), Ben Hopkins, Lori Housman, Geena Kim, Sean Lyons, Eamon Molloy, Romain Parsad, Allison Percy, Lisa Ramirez-Branum, Sarah Sajewski, Robert Stewart, Chris Zogby, and the staff of the Joint Committee on Taxation contributed to the analysis. Chad Chirico, Theresa Gullo, Leo Lex, Sarah Masi, Alexandra Minicozzi, Julie Topoleski, and Chapin White provided guidance and helpful comments. Ryan Greenfield and Rachel Matthews fact-checked the report.
Mark Hadley, Jeffrey Kling, and Robert Sunshine reviewed the report. John Skeen was the editor, and Casey Labrack was the graphics editor. The report is available on CBO’s website (www.cbo.gov/publication/56571).
CBO continually seeks feedback to make its work as useful as possible. Please send any comments to email@example.com.
Phillip L. Swagel