Wednesday, August 24, 2011

CBO’s August Update and Health Care Spending

This morning the Congressional Budget Office released its annual August update to the budgetary baseline, which reflects changes to the economic assumptions made since CBO released its budgetary baseline last winter, as well as changes in law (e.g., passage of the Budget Control Act).

Most of the changes are economic in nature, and do not affect health care projections.  However, there are several health care-related nuggets of note in the document:

  • A ten year SGR “freeze” would have a NET cost of $298 billion.  This option would maintain Medicare reimbursement levels at 2011 rates through 2021, rather than imposing the 30 percent payment reductions scheduled to take place on January 1, 2012.  The net number cited above reflects total increased federal spending, offset in part by higher Medicare Part B premiums (because beneficiaries pay 25 percent of all increases in Medicare Part B costs through higher premiums).  Debt service costs on the SGR “freeze” would total an additional $53 billion, over and above the $298 billion in new spending. (Page 26, Table 1-8)
  • CBO has made technical revisions that lower its projections of spending for Medicare by $9 billion for 2011 and by a total of $10 billion for the 2012–2021 period.  Those revisions are based primarily on lower-than-expected spending for Part A (Hospital Insurance) and Part D (prescription drug) services during the first half of calendar year 2011.” (Page 69)  Elsewhere in the document, CBO said that this spending slowdown could be due in part to “changes in the use of health care services related to weak economic conditions, but whether such changes have occurred is not clear at this point.” (Page 11)
  • CBO has lowered its 10-year projections of spending for other health care programs by a net amount of $25 billion.  That change is mostly attributable to revisions to the agency’s methodology for estimating the amount of refundable tax credits that will be provided to subsidize the purchase of health insurance and the amount of cost-sharing subsidies that will be available for health insurance purchased through exchanges beginning in 2014.” (Page 69)  The technical reasons for this change were not specified, but it is possible that the revision could be due to an interpretation about the definition of “affordability” when it comes to eligibility for insurance subsidies – specifically, an indication that families are NOT eligible for insurance subsidies if employer-based coverage for a worker (i.e., a self-only plan) is affordable, regardless of whether or not an employer-based plan is affordable for the entire family.
  • CBO is now anticipating a one-year delay in implementing the federal long-term care insurance program, the Community Living Assistance Services and Supports program.  Based on the pace of implementation actions thus far, CBO now estimates that the program will begin collecting premiums in fiscal year 2013, lowering projected offsetting receipts (whereas, for the March baseline, CBO assumed that those collections would begin in fiscal year 2012).” (Page 69)