Federal Healthcare Spending Projections Inch Upward

Federal spending on Medicare, Medicaid, the Children’s Health Insurance Program and exchange subsidies will rise from 5.2% of the country’s economic output in 2015 to 6.2% in 2025, the Congressional Budget Office said Tuesday inupdated budget projections (PDF).

The CBO said in its March report that those healthcare programs would constitute 6.1% of the country’s gross domestic product by 2025. The slight upward revision means the government will spend $272 billion more on healthcare from 2016 to 2025. A new federal law accounted for a big portion of the new estimate.

The Medicare Access and CHIP Reauthorization Act of 2015, which was enacted in April and repealed Medicare’s sustainable growth rate for physician payments, led to CBO officials raising Medicare expenses by $159 billion over the next decade. That legislation calls for pay increases of 0.5% for physicians over the next four years, followed by six years of flat payment rates.

The law also “extended other expiring Medicare provisions and raised premiums for relatively high-income enrollees,” which will result in higher Medicare expenses, the report said.

However, federal subsidies for health plans purchased on the Affordable Care Act’s exchanges are expected to cost the government $16 billion less than expected, the CBO said. Instead, more people are expected to obtain coverage through CHIP or Medicaid’s Transitional Medical Assistance program.

Senate Finance Committee Chairman Orrin Hatch (R-Utah) did not address specific healthcare issues in a statement Tuesday and instead said “structural changes” were needed for Medicare and Medicaid.

The CBO also offered other, more mixed news. Although the country’s GDP is expected to increase by a more modest 2% this year, lower than the 2.9% original growth prediction, the federal deficit is $60 billion lower than estimated in March. Federal tax revenues will be higher than expected, including fees and fines stemming from the ACA.

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