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From Health Law Daily, August 26, 2015

Federal health care spending likely to exceed $1 trillion in 2015

By Kayla R. Bryant, J.D.

The Congressional Budget Office (CBO) estimates that federal spending for major health care programs will jump about 13 percent ($106 billion) in 2015. Of this amount, $49 billion will be for Medicaid outlays due to the enrollment of the program’s newly eligible expansion population under section 2001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Total federal health spending is expected to be about $1.035 trillion for 2015, while the CBO projects that by 2025, $1.899 trillion will go toward Medicare, Medicaid, health insurance subsidies, and the Children’s Health Insurance Program (CHIP) (CBO Report, August 25, 2015).

Medicare and Medicaid. The CBO expects that in 2015 the Medicare program will grow at its fastest rate since 2009, increasing spending by about 7 percent ($35 billion). The CBO also notes that this growth stems from the fact that ACA provisions intended to reduce the growth rate have already been implemented. Although these provisions will help constrain some program spending in the future, it will no longer reduce the growth rate. Some of the increase in Medicaid expenditures can be explained by the relevant ACA provisions applying to all of fiscal year (FY) 2015, while they were only active for nine months of FY 2014. Additionally, the CBO projects that Medicaid enrollment will rise by 5 to 10 percent. By 2025, an estimated $1.2 trillion will go to Medicare and $571 billion will fund Medicaid. The estimates for Medicare are for gross spending and do not include Medicare premiums or other offsets.

ACA. Subsidies issued to those who need help affording health care coverage on the various health insurance exchanges established under section 1311 of the ACA will increase by an estimated $22 billion in 2015, compared to $15 billion last year. Similar to the Medicaid provisions, the subsidies offered under the ACA will be available for the entirety of FY 2015 compared to nine months of FY 2014. By 2025, the CBO estimates that $105 billion will go to health insurance subsidies as well as related spending.

Debt limit. The CBO also expects that the “extraordinary measures” the Department of the Treasury had been able to take to avoid breaching the debt ceiling will be exhausted and that the department will deplete its cash between mid-November and early December. In February 2014, the debt ceiling was suspended through March 15, 2015, at which time the limit would be reset to match the amount of outstanding debt. The Treasury does not have room left to borrow under standard procedures, and has been using other measures to continue to borrow. The CBO expects that these measures and regular cash inflows (such as payments to Medicare Advantage and Part D) will allow the Treasury to finance the government through the end of the current FY and the beginning of the next.

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