CBO Releases Budget and Economic Projections for Next Ten Years

The Congressional Budget Office (CBO) released the annual Budget and Economic Outlook report in late January. CBO is a non-partisan Congressional Agency which serves as Congress‟ personal economic and budgetary analysis resource. In addition to reporting on broad economic and budgetary trends, the CBO also provides analysis of the economic impact of most legislation. This annual report includes their estimates of the ten-year outlook on the Federal budget and the economy.

The major takeaway of this year’s report is that for the first time since 2009 the projected 2016 federal budget deficit will increase in relation to the size of the economy. The report estimates that the federal deficit will be 2.9 percent of Gross Domestic Product (GDP) in 2016, up from 2.5 percent in 2015. However, the report also indicated that the CBO expect the economy to expand “solidly this year and next.”

The Federal Health Care Programs (Medicare, Medicaid, Children’s Health Insurance Program and federal subsidies for health insurance premiums) will be a significant contributor towards the increased spending. Federal Health Care Program spending will account for about $1.1 trillion in 2016 and is projected to rise to $2 trillion by 2026. Medicare will account for most of this spending. Medicare is estimated to cost $692 billion of the $1.1 trillion.

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The uptick in discretionary spending is a consequence of the Bipartisan Budget Act of 2015, which raised the discretionary spending caps in equal parts military and domestic, and the subsequent Omnibus bill that appropriated the money for FY 2016.

Medicare spending on a per-beneficiary basis is expected to grow at a slower annual rate of 1.6 percent over the next ten years when adjusted for inflation. Per-beneficiary spending had grown at a rate of 4 percent annually for the past few decades. Despite an influx of beneficiaries from the baby boomer generation, many of them will be younger and therefore “healthier” which will offset the costs of the older, more costly beneficiaries already in the program.

The CBO report reiterates concerns over the long term sustainability of the federal spending. Healthcare spending accounts for almost 30 percent of the federal budget. For comparisons, Social Security accounts for just under 20 percent of the federal budget. With such a large percentage of federal spending going towards healthcare, many signs point to healthcare spending remaining a prominent fixture in the national dialogue about the nation’s debt.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA
President/CEO