The Congressional Budget Offices (CBO) released the Update to the Budget and Economic Outlook for 2020 to 2030 and the Outlook for Major Federal Trust Funds for 2020 to 2030. The update provides a 10-year projection of federal spending, revenue, deficits, and debt assuming current laws and policies remain generally unchanged, while the outlook projects the balances held by the trust funds.
Overall, the CBO estimates that the deficit for fiscal year (FY) 2020 to reach $3.3 trillion and the agency expects the Medicare Hospital Insurance Fund will become insolvent by 2024, two years earlier than the projection from March.
Highlights from each of the reports follow:
- Update the Budget and Economic Outlook – The CBO estimates that the deficit for FY 2020 to be $3.3 trillion, which is more than triple last years deficit, and the highest deficit in America’s history. The public debt is projected to be larger than the size of the entire economy by FY 2021 at 104 percent of gross domestic product (GDP), while the estimated deficit over the next 10 years is projected to be $13 trillion. Health-related estimates follow:
- Medicare Outlays – CBO projects that outlays will increase by 12 percent in 2020, from $644 billion in 2019 to $721 billion. CBO notes that this increase is in part due to advanced payments to providers and the agency expects to recoup those payments in 2020 and 2021. Medicare outlays are projected to rise to 4.3 percent of GDP in 2030.
- Medicaid Outlays – CBO notes that due to the COVID-19 pandemic, Medicaid spending rapidly rose in 2020. The agency estimates $466 billion in outlays in 2020, an increase of $57 million from 2019. Federal outlays for Medicaid are expected to remain relatively stable as a percentage of GDP over the next decade.
- Health Insurance Subsidy Outlays – CBO estimates that outlays for subsidies for health insurance purchased through the marketplaces and related spending are expected to average 0.2 percent of GDP per year through 2030.
- Outlook for Major Federal Trust Funds –The CBO expects the balances held by federal trust funds to fall by $43 billion in FY 2020, which is $100 billion lower than the $57 billion surplus the agency estimated in January. Additionally, spending from the trust funds is projected to exceed $18 billion on 2021.
- Outlook for Medicare Trust Fund – Overall, the CBO projects that the Hospital Insurance (HI) Trust Fund to be insolvent by 2024 and the Supplementary Medical Insurance (SMI) Trust Fund to reach $240 billion in holding in 2030. Additional details follow:
- Hospital Insurance Trust Fund – CBO projects the HI trust fund, which funds Part A services, to increase from $336 billion in 2020 to $499 billion in 2030, an average annual increase of about 4 percent. However, annual expenditures are projected to grow more rapidly, at an average annual increase of about 5 percent. These estimates will leave the HI trust fund exhausted by 2024, two years earlier than the March estimate.
- Supplemental Medical Insurance Trust Fund – The SMI trust fund holdings, which funds Part B and Part D, is estimated to reach $240 billion in 2030. The Part B portion of the SMI fund that is financed through transfers from the general fund of the Treasury and through monthly premium payments, is set to cover approximately 25 percent of the program’s expected spending. The Part D portion of the SMI fund is financed through transfers from the general fund, monthly premium payments, and transfers from states. CBO projects that transfers from the general fund are set to cover total expected spending for benefits and administrative costs net of the amounts transferred from beneficiaries and states.