The federal government will spend $660 billion this year on health care for Americans under 65 years old, according to a new Congressional Budget Office (CBO) study. The report highlights how the government subsidizes health care costs for nearly all Americans, not just those who are older or have limited incomes.
The government subsidizes people under 65 in several ways: through Medicaid and the Children’s Health Insurance Program (CHIP), Affordable Care Act ( ACA) tax credits to buy private insurance, and preferential tax treatment for employer-sponsored insurance.
Over the next decade, CBO projects, the cost of these activities will total nearly $9 trillion. Most of that total will go to Medicaid/CHIP ($3.8 trillion) and subsidies for employer-provided health benefits ($3.6 trillion).
Economists have long held that the tax exclusion for employer-provided benefits encourages excessive spending, driving up costs for the government and consumers. Unfortunately, in December lawmakers delayed for two years an ACA provision designed to indirectly limit the exclusion and promote more efficient care by imposing an excise tax on high-cost employer health plans (the “Cadillac Tax”).
The CBO report reinforces the importance of private and public efforts to deliver and pay for care in ways that eliminate wasteful spending and slow cost growth.