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Group Health Gets the Biggest Federal Health Subsidy: CBO

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The biggest U.S. health insurance subsidy for people under 65 is the federal income tax break for employer-sponsored health benefits, according to a new analysis from the Congressional Budget Office.

The group health tax exclusion will account for about $283 billion of the $737 billion in 2019 federal health insurance subsidies for people under the normal Medicare eligibility age, the CBO estimates.

The group health tax exclusion amounts to about 38% of 2019 federal health insurance subsidies for people in the pre-Medicare age group. The share of pre-Medicare-age federal health insurance subsidies going to the group tax exclusion could rise to 44% of the total by 2029, the CBO predicts.

(Related: CBO: What If We Shrink the Group Health Tax Break?)

The group health tax subsidy will cost the federal government about $4.2 trillion over the 10-year period from 2020 through 2029, according to the new CBO projections.

The CBO is estimating that all types of federal health insurance subsidies for the pre-Medicare age group will amount to $9.9 trillion over that same 10-year period.

The Medicare Office of the Actuary has predicted that the United States will spend about $47 trillion over the 10-year period from 2018 through 2017 on all sorts of health care, including long-term care.

Medicare could account for about $18 trillion in spending over that 10-year period.

Here are the estimated 2019 subsidy amounts for some other types of pre-Medicare age subsidies:

  • Medicaid for Non-Disabled Adults: $112 billion
  • Medicaid for the Blind and Disabled: $109 billion
  • Medicaid for Children/Children’s Health Insurance Plan Coverage: $94 billion
  • Affordable Care Act Exchange Plan and Basic Health Plan Subsidies: $62 billion

The CBO has also provided estimates of the average amount of federal subsidy money per various type of subsidy recipient.

Here’s a look at some of the per-recipient 2019 subsidy averages for four major types of health insurance:

  • Employment-Based Coverage: $1,810
  • Medicaid/CHIP: $4,620
  • ACA Individual Health/Basic Health Plan: $6,490
  • Medicare: $10,620

The CBO released a similar subsidy analysis about a year ago.

The CBO believes that Medicaid and CHIP are covering about 2 million more people than they were covering a year ago, and that individual health policies and the Basic Health Program might be covering about 2 million more people.

They believe total federal health subsidy spending has increased about 1.9%.


A copy of the CBO analysis of federal health insurance subsidies is available here.

— Read Kleinbard to Congress: The Cows Must Die, on ThinkAdvisor.

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