CBO ratchets down long-term healthcare spending forecast

Cost controls implemented under the Affordable Care Act (ACA) will lead to slower overall federal healthcare spending over the next 25 years.

A new forecast by the Congressional Budget Office (CBO) concludes that overall federal spending will represent 8 percent of the gross domestic product (GDP) by 2039. Although that's one-tenth of one percent lower than prior projections, it still results in reduced spending into the trillions of dollars.

Altogether, the CBO predicts that the government will have spent about $1.23 trillion less than original projections on Medicare, Medicaid and other federal healthcare programs between 2010, the year the ACA was passed into law, and 2039, based on its adjusted forecast.

"It's pretty great news, and what's striking is that as cost increases have come down, all the quality measures have gone up," John Rother, chief executive of the National Coalition on Health Care, told the Wall Street Journal. "We are actually doing better."

However, the CBO  concluded that cost savings initiatives for Medicare--including accountable care organizations to improve the efficiency of care delivery and financial penalties to hospitals for avoidable patient readmissions and medical errors--are not the only drivers. The report also cited lower anticipated economic growth and a revised downward projection for interest rates, according to the New York Times.

But the Times also reported that healthcare spending will still eventually become the 800-pound gorilla of federal spending. Healthcare will likely become the U.S. government's single biggest expense by 2030, as the Baby Boomer generation continues to age and price technological advances in care continue to come to market. Healthcare spending will outstrip GDP growth by 1.7 percent within the next decade, according to the WSJ.

More recently, healthcare spending in the U.S. grew at a 5.6 percent annual rate in the fourth quarter last year, according to data from the U.S. Department of Commerce's Bureau of Economic Analysis, the highest rate in a decade.

To learn more:
- check out the CBO forecast (.pdf)
- read the New York Times article
- here's the Wall Street Journal article

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