Uncle Sam (Image: Thinkstock)

The U.S. federal government now spends about $705 billion on health coverage subsidies and tax breaks per year for the 273 million people who are under 65, according to the Congressional Budget Office.

That means the average U.S. resident under age 65 is getting $2,582 in federal health coverage subsidies per year.

The government could also get about $21 billion in health coverage program penalty payments this year. That could reduce average net spending on the subsidies to about $2,509 per U.S. resident under 65.

The CBO included the subsidy and population totals in a new report on federal subsidies for health coverage for people 65.

The CBO is a congressional research office that helps members of Congress understand how programs affect federal finances, and how proposed legislation might affect federal finances. CBO analysts prepared the new report to show policymakers how CBO analysts think about existing federal health coverage subsidy programs when the analysts are looking at how proposed legislation might affect the subsidy programs.

(Related: Conning: ACA Subsidies Look Inefficient)

A copy of the report is available here.

Who Gets What

When the CBO analysts computed the 2018 subsidy totals, they included programs such as the Affordable Care Act premium tax credit program, which could provide about $49 billion in support this year; $4 billion for the ACA Basic Health Program, which provides funding that states can use to set up the equivalent of a managed Medicaid buy-in program for the “near poor”; and the $82 billion for help for people under 65 who qualify for Medicare.

The analysts included the ACA cost-sharing reduction program, which is a program with funding that has been blocked by Republicans in Congress, but set the value for the cost-sharing reduction subsidy program at 0 for 2018.

The analysts counted the value of tax breaks for employment-related coverage as “tax expenditures.”

The tax exclusion for group health benefits will reduce federal government revenue by $266 billion this year, the CBO predicts.

The government may also spend about $1 billion on group health tax credits for small employers, and $5 billion on the income tax deduction for self-employment health insurance.

Because most people who take the self-employment health insurance tax deduction will use it to buy individual or family major medical coverage, we included it in the subsidy value total for users of individual and family major medical coverage.

The CBO did not include any figures for money that the federal government spends to provide health care for the uninsured, such as subsidies for health clinics in neighborhoods where many people are poor.

The CBO also excluded the amounts that the insureds and their families pay for coverage, and the subsidies that state governments, local governments and charities provide.

We came up with figures for average subsidy spending per person by dividing the CBO’s subsidy spending figures by the CBO’s estimates for the number of people served by each subsidy.

Average health coverage subsidy spending per person ranges to none, for the uninsured, up to $10,250, for Medicare enrollees under 65.

The average subsidy level for Medicare enrollees under 65 is so high because most young Medicare enrollees are getting kidney dialysis or are disabled.

The annual value of group health coverage tax breaks averages about $1,690 per enrollee.

For the federal government, the annual cost of helping people get covered through commercial individual and family major medical coverage appears to be roughly comparable to the cost of helping people get covered through Medicaid and the Children’s Health Insurance Program (CHIP).

The average annual federal subsidy for individual and family commercial coverage is about $3,700 for all insureds, and about $6,400 per year for the insureds who are getting Affordable Care Act public exchange plan premium tax credit subsidies.

The average annual federal subsidy for people with Medicaid or CHIP coverage is about $4,400 per covered person.

 

Number of People (millions) Subsidy Value*, 2018 Average Coverage Subsidy per Person, 2018
Employment-Based Plans 158  $        267  $          1,690
Individual and Family Major Medical 15  $          56  $          3,733
ACA Basic Health Program 1  $             4  $          4,000
Medicaid/Children’s Health Insurance Program 67  $        296  $          4,418
Medicare for People Under Age 65 8  $          82  $        10,250
Uninsured 29  $           0  $                 0
TOTAL 273  $        705  $          2,582
* The total here excludes $21 million in revenue from health subsidy penalties, and a $1 million effect from rounding off the subtotals.
Source: CBO

Back in 2007, when Congress was considering the proposals that led to the drafting of the Affordable Care Act legislation, CBO analysts estimated that an individual major medical subsidy program might help 2 million additional people get covered and cost about $1,050 per year per newly insured individual.

The CBO analysts predicted that a Republican proposal to replace the group health tax exclusion system with individual major medical subsidies would help 6.7 million additional people get covered, at a cost of $2,500 per year per newly insured individual

Analysts at PricewaterhouseCoopers LLP estimated in 2008, shortly after Barack Obama became president, that his health system change proposals would help about 12 million additional people get covered and cost about $2,500 per year per newly insured individual.

— Related, on ThinkAdvisor:

— Connect with ThinkAdvisor Life/Health on Facebook and Twitter.