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CBO updates Medicare and Medicaid spending projections

Posted on August 22, 2012 | No Comments

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The Congressional Budget Office (CBO) released today a new report which found that Medicare and Medicaid spending are expected to grow to a larger share of the nation’s economy over the next decade and the Affordable Care Act’s (ACA’s) insurance subsidies will drive mandatory spending even higher. The report updates CBO’s budget and economic outlook.

CBO found that found that Medicare spending will grow from 3.7 percent of GDP in 2013 to 4.3 percent by 2022 and that Medicaid spending will increase from 1.7 percent of GDP in 2013 to 2.4 percent in 2022. These new projections account for the Supreme Court’s momentous June 28th decision regarding the constitutionality of the ACA. All together, CBO found that Medicare, Medicaid, and Social Security would account for 12.2 percent of GDP in 2022, or 55 percent of federal spending.

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On July 24, the Centers for Medicare and Medicaid Services (CMS) published guidance on how state Medicaid offices can target spending associated with "super-utilizers." "Super-utilizers" are a subset of the Medicaid population, particularly those in long-term or managed care settings, that account for a disproportionately high portion of spending. The guidance was issued with the intent of sharing different methods states may use in order to help control the costs and improve the quality of care for this demographic, as well as shed light on successful programs practiced by other states. Some of the strategies mentioned in the guidance include creating a web-based provider portal incorporating patient data and aggregating information on the different payers.
According to a report published by the Congressional Budget Office (CBO), federal spending on means-tested programs and tax credits is projected to double over the next decade. At present, the federal government devotes about one-sixth of spending to 10 means-tested programs and tax credits. These ventures provide cash payments or assistance in obtaining health care, food, housing, or education to low-income individuals. Those programs and credits consist of the following:
  • Medicaid,
  • The low-income subsidy (LIS) for Part D of Medicare (the part of Medicare that provides prescription drug benefits),
  • The refundable portion of the earned income tax credit (EITC),
  • The refundable portion of the child tax credit (CTC),
  • Supplemental Security Income (SSI),
  • Temporary Assistance for Needy Families (TANF),
  • The Supplemental Nutrition Assistance Program (SNAP, formerly called the Food Stamp program),
  • Child nutrition programs,
  • Housing assistance programs, and
  • The Federal Pell Grant Program.
In 2012, federal spending on those programs and tax credits totaled $588 billion. Medicaid accounted for more than 40 percent of the federal spending on those programs in 2012. A decade from now, according to the CBO report, Medicaid will account for an even larger share of spending on those programs. A new means-tested program, federal subsidies to help low- and moderate-income people purchase health insurance offered through insurance exchanges, which will begin in 2014, will be the second-largest means-tested program by 2023, CBO estimates. According to the report, the growth in spending is due to two primary factors: an increasing number of participants in the programs and increased spending per participant.
A report recently released by the Kaiser Family Foundation (KFF) serves as a review of Medicare policy options that may be discussed in upcoming budget debates. The report presents a wide array of options in several areas and lays out the possible implications of these options for Medicare beneficiaries, health care providers, and others, as well as estimates of potential savings, when available. The report includes options in the following areas:
  • Medicare eligibility, beneficiary costs, and program financing;
  • Medicare payments to providers and plans;
  • Delivery system reform and care for high-need beneficiaries;
  • Medicare program structure; and
  • Medicare program administration, including program integrity.
According to a survey released this morning by the Kaiser Family Foundation, the slowly improving economy helped Medicaid spending growth slow to one of its lowest rates in the last fiscal year (FY). The survey found that total Medicaid spending across states increased only 2 percent in fiscal year 2012. The relatively slow spending and enrollment growth are expected to continue in FY 2013. Cost pressure and cost containment were dominant themes in the slowed spending growth, but states were also able to consider program changes, payment and delivery system reforms and continue efforts to re-orient long-term care programs to community-based care models. Eligibility rules for Medicaid remained stable due to the maintenance of eligibility (MOE) protections under the Affordable Care Act (ACA), and a number of states adopted targeted eligibility expansions or simplified enrollment procedures. States are also preparing for the new role for Medicaid in the implementation of the ACA. Under the June 2012 Supreme Court ruling, state policy makers can decide whether and when to implement the Medicaid expansion. The report's findings are drawn from the Kaiser Commission on Medicaid and the Uninsured (KCMU) and Health Management Associates (HMA) budget survey of Medicaid officials in all 50 states and the District of Columbia. The survey collects data regarding trends in Medicaid spending, enrollment and policy initiatives. Click here for the executive summary.
The Congressional Budget Office presents the long-term budget outlook under two scenarios in a new report. These scenarios embody different assumptions regarding future policies governing federal revenues and spending. The first, the extended baseline scenario, reflects the assumption that current laws generally remain unchanged and that lawmakers will allow changes that are schedule under current law to occur, forgoing adjustments routinely made in the past that have boosted deficits. The second, the extended alternative fiscal scenario, incorporates the assumptions that certain policies that have been in place for a number of years will continue and some provisions of law that might be difficult to sustain for a long period will be modified. These two scenarios span a wide range of possible policy choices. The report focuses on the next 25 years and gives special focus to outlays for major health care programs. Under both scenarios, the report estimates that total outlays for federal health care programs will grow much faster than the gross domestic product (GDP), increasing from 5.4 percent of the GDP in 2012 to nearly 10 percent in 2037. National health care spending is also expected to rise. Health care expenditures is expected to increase to almost one-quarter of the GDP by 2037. CBO suggested that key factors contributing to this growth in spending have been the emergence of new medical technologies, rising personal income, and the expanding scope of health insurance coverage.
The Congressional Budget Office (CBO) released today an update on the budgetary impact of the Affordable Care Act (ACA). Although overall projections are similar to those released in prior years, there are several important changes in this year's updated estimates. For example, in March 2010 when the ACA was enacted, CBO estimated that the number of uninsured individuals would fall by 32 million by 2019. Now CBO estimates that the number will only fall by 31 million by 2019, but by 33 million by 2022. The projections regarding health insurance coverage has also changed...
In their recent publication, "Building Tomorrow's Healthcare System: The Pathway to High Quality, Affordable Care," BlueCross BlueShield Assocation (BCBSA) calls for incentives to reward safety and reinforce primary care. One of the nation's largest insurance companies, BCBSA encourages federal government to adopt "value-based purchasing" and urges individuals eligible for Medicare or Medicaid to enroll in managed care plans. The Association also wants faster implementation of these types of programs in order to show savings more quickly.
In her New England Journal of Medicine article, "Hard Choices--Alternatives for Reining in Medicare and Medicaid Spending," Dr. Meredith B. Rosenthal of the Harvard School of Public Health compares and contrasts the two most prominent proposals to reform health care: Paul Ryan's "Roadmap for America's Future" and the White House's Affordable Care Act (ACA). She summarizes the main arguments supporting and opposing the two plans. The beauty of Ryan's plan is that by fixing the federal government's contribution to Medicare and Medicaid to a formula unrelated to the growth of overall health care costs, it would guarantee controlled federal spending growth. However, this would also shift financial risk to beneficiaries and state governments. The ACA alters the landscape for control federal health care spending by creating new institutions intended to facilitate progress toward reform and by directly altering payment formulas for Medicare and Medicaid. The downside of this cost savings portion of the ACA is that implementation of payment and delivery reforms is complex.
In an article published in Health Affairs, actuaries with the Center for Medicare and Medicaid Services project US health spending will grow at a rate .2 percent faster under health reform than projected under prior law (6.3 percent instead of 6.1) over the next decade. They also estimate the administrative costs for health reform will be $2.4 billion for the US Department of Health and Human Services, $37.7 billion in state and federal costs for establishing insurance exchanges, and an increase of $31 billion in state and federal administrative costs for Medicaid.
The Congressional Budget Office (CBO), the legislative branch agency responsible for estimating the cost of legislation, issued two reports on July 24th related to the Affordable Care Act (ACA). The first report, revised cost and health insurance coverage estimates for the ACA in the wake of the Supreme Court ruling in NFIB v. Sebelius[1]. In that ruling, the Court concluded the individual requirement to purchase health insurance coverage, while not a reasonable exercise of congressional Commerce Clause authority, is constitutional as a tax under congressional Spending Clause authority. The Court also held that the ACA’s Medicaid expansion, requiring states to cover all non-elderly individuals with incomes below 133[2] percent of the federal poverty level was unconstitutional. However, rather than striking the requirement, the Court precluded the Secretary of the Department of Health and Human Services (HHS) from enforcing the mandate by withholding all Medicaid funds. As a result of the ruling, states now have the option of expanding coverage to 133 percent of the federal poverty level (FPL), and will receive enhanced federal matching funds as provided under the law, but are not required to expand coverage.[3]