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JUNE 2017
Longer-Term Effects of the Better Care
Reconciliation Act of 2017 on Medicaid Spending
In the Congressional Budget Office's assessment,
Medicaid spending under the Better Care Reconcilia-
tion Act of 2017 would be 26 percent lower in 2026
than it would be under the agency's extended baseline,
and the gap would widen to about 35 percent in 2036
(see Figure 1). Under CBO's extended baseline, overall
Medicaid spending would grow 5.1 percent per year
during the next two decades, in part because prices for
medical services would increase. Under this legislation,
such spending would increase at a rate of 1.9 percent per
year through 2026 and about 3.5 percent per year in the
decade after that.
CBO and the staff of the Joint Committee on Taxation
do not have an insurance coverage baseline beyond the
coming decade and therefore are not able to quantify the
legislation's effect on insurance coverage over the longer
term. However, the agencies expect that after 2026,
enrollment in Medicaid would continue to fall relative to
what would happen under the extended baseline.
On the basis of consultation with the budget com-
mittees, CBO's just-released cost estimate for the bill
measured the costs and savings relative to CBO's March
2016 baseline projections, with adjustments for legisla-
tion that was enacted after that baseline was produced.
For consistency, this longer-term analysis uses CBO's
extended baseline published in July 2016.2 CBO ana-
lyzed these longer-term effects at the request of the
Ranking Members of the Senate Budget Committee and
the Senate Finance Committee.
1. Congressional Budget Office, cost estimate for H.R. 1628, the
Better Care Reconciliation Act of 2017, an amendment in the
nature of a substitute [LYN17343] as posted on the website of
the Senate Committee on the Budget on June 26, 2017 (June 26,
2017), www.cbo.gov/publication/52849.
2. Congressional Budget Office, The 2016 Long- Term Budget
Outlook (July 2016), www.cbo.gov/publication/51580.
CBO's Extended Baseline
The first 10 years of projections in CBO's extended
baseline match the agency's 10-year baseline projections,
which are based on a detailed analysis of the Medicaid
program. Beyond the coming decade, however, pro-
jecting federal spending on Medicaid becomes increas-
ingly difficult because of the considerable uncertainties
involved. A wide range of changes could occur-in
people's health, in states' decisions about Medicaid
eligibility and covered benefits, and in the delivery of
medical care-that are almost impossible to predict but
that could nevertheless have a significant effect on federal
spending on Medicaid. Therefore, for the projections
beyond 2026, CBO has adopted a formulaic approach-
one that combines estimates of the number of enrollees
with fairly mechanical projections of growth in federal
spending on Medicaid per enrollee (adjusted to account
for demographic changes in Medicaid enrollees). That
straightforward approach, which was designed to help
make long-term projections of federal deficits and debt,
can be usefully applied only when analyzing proposed
changes in law that, like this bill, would affect spending
in a similarly straightforward manner.
The agency's estimates of per-enrollee growth in spend-
ing combine projected growth in potential gross domes-
tic product (GDP) per person and projected excess cost
growth for Medicaid, which together average 4.3 percent
in CBO's extended baseline during the 2027-2036
period. Potential GDP expresses an estimate of the max-
imum sustainable level of growth in the economy. Excess
cost growth is the growth rate of health care spending
per person (after the effects of demographic changes are
removed) relative to the growth rate of potential GDP
per person. (CBO uses potential GDP rather than actual
GDP in its estimate of excess cost growth to limit the
effect of cyclical changes in the economy on its estimate.)
The concept of excess cost growth and its phrasing
are not intended to imply that growth in health care](ViewImageLocal?handle=hein.congrec/cbo3575&div=1&collection=&method=preview&ext=.png&size=3)
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