Medicare Drug Plan Subsidies Could Rise Like a Rocket: CBO

If current laws, regulations and programs stay in place roughly as is, federal government subsidies for low-income users of Medicare Part D drug plans might grow rapidly over the next 10 years.

Medicare Part D plan subsidy spending could grow an average of 9% per year from 2019 through 2028, according to analysts at the Congressional Budget Office.

Medicare Part D subsidy spending could increase to $65 billion in 2028, from about $28 billion this year, if the CBO analysts’ projections are correct.

CBO analysts expect overall federal spending on all “mandatory, means-tested” health care program subsidies to grow 5.6% per year over the next decade.

Spending on other types of mandatory, means-tested welfare programs, such as food stamps, could grow an average of just 1.8% per year.

(Related: 18 Federal Health Budget Cut Options)

The CBO analysts included the spending predictions in a new look at federal outlays on mandatory, means-tested programs.

A copy of the analysis is available here.

Definitions

The CBO is an arm of Congress. It helps members of Congress understand the federal budget and federal spending programs, and how policy proposals might affect the federal budget.

CBO analysts define “mandatory” spending as spending required by federal laws.

A “means-tested” program is a program designed to provide help for people with little income, few assets, or both a low income and few assets.

The new analysis excludes spending on programs such as Medicare, which is not means-tested, and on Pell Grant aid for college students, which is discretionary.

The health care section in the new analysis includes spending on Medicaid, Affordable Care Act premium tax credit subsidies, and Children’s Health Insurance Program (CHIP) subsidies as well as Medicare Part D subsidies.

Current Spending

The federal government will spend about $742 billion this year on all kinds of mandatory, means-tested programs.

Food stamps, support for children in foster care, earned income tax credits, and other types of income security programs account for $256 billion of the mandatory, means-tested spending, and health care programs account for $473 billion of the total.

The biggest single mandatory, means-tested program is Medicaid.

The federal government will spend about $383 billion on Medicaid subsidies this year, and, under current law, Medicaid spending could rise 5.5% per year over the next decade, according to CBO projections.

ACA subsidies could grow about 5.2% per year, from $47 billion this year.

CHIP spending could hold steady at about $16 billion.

— Read also, on ThinkAdvisor:

• Medicare Trustees Look Ahead to the Year 2090
• Retirees Can Reduce Medicare Part D Costs With Proactive Planning
• “Doughnut hole” Discourages Drug Use

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