Five Health Care Takeaways from CBO’s Report

The Congressional Budget Office (CBO) released its Budget and Economic Outlook for 2013–2023 today. Here are five major takeaways:

1)      Health care entitlement spending is bypassing all other spending. Spending on Medicare, Medicaid, Obamacare subsidies, and the Children’s Health Insurance Program will be greater than all other spending—including Social Security and defense spending: “Spending for major health care programs will be nearly 5 percent of GDP [gross domestic product] in 2013, and such spending is projected to grow rapidly when provisions of [Obamacare] are fully implemented by middecade, reaching 6.2 percent of GDP in 2023.”

2)      Obamacare still costs well over a trillion dollars. Obamacare is still projected to have a gross cost of over $1.6 trillion from 2013 to 2022—which only includes nine years of full implementation because the major provisions, exchange subsidies, and Medicaid expansion don’t begin until 2014. This spending should be stopped before it starts.

3)      CBO anticipates a delay in Obamacare exchange operation. CBO has revised its estimates for how quickly people will enroll in the exchanges and Medicaid: “That change reflects the agencies’ judgment about a combination of factors, including the readiness of exchanges to provide a broad array of new insurance options, the ability of state Medicaid programs to absorb new beneficiaries, and people’s responses to the availability of the new coverage.” It projects that only 7 million people will enroll in the exchanges in 2014, compared to its July 2012 estimate of 9 million. However, CBO anticipates that by 2016, 24 million will be enrolled, compared to its previous estimate of 23 million.

4)      More Americans lose employment-based insurance. CBO has updated its projection for the number of Americans who will lose employer-sponsored insurance (ESI) as a result of Obamacare. In August 2012—about six months ago—it estimated that 4 million people would lose ESI. It now estimates that 7 million Americans will lose ESI due to Obamacare. Also, employers are now anticipated to pay $13 billion more in penalties compared to the August 2012 baseline, totaling $130 billion over 10 years.

5)      Medicare cost projections are unrealistic. Today’s report shows Medicare costs totaling over $8 trillion from 2014 to 2023. This seems pretty bad—but the reality of the situation is much worse. CBO’s baseline scenario reflects current law, which assumes that Medicare physicians will take an enormous pay cut—about 25 percent—in 2014. But this is highly unlikely, and if paying for the override isn’t offset with other Medicare spending cuts, it will increase Medicare’s costs even further.

Moreover, Obamacare makes over $700 billion in cuts to Medicare from 2013 to 2022. In some years, these cuts will total over $100 billion in just one year. Much like the physician cuts, Congress is very likely to override these payment reductions due to the impact they would have on seniors’ ability to access care, thus further increasing Medicare’s costs.

The bottom line: Government spending on health care programs is still out of control, and Obamacare makes it worse.

As Heritage’s Salim Furth puts it, “As discouraging as the new CBO Outlook is, reality will probably be worse unless federal policies improve.”