CONGRESSIONAL BUDGET OFFICE

CONGRESSIONAL BUDGET OFFICE
Douglas W. Elmendorf, Director
U.S. Congress
Washington, DC 20515
www.cbo.gov

April 5, 2011
Honorable Paul Ryan
Chairman
Committee on the Budget
U.S. House of Representatives
Washington, DC 20515


Dear Mr. Chairman:
In response to your request, the Congressional Budget Office (CBO) has conducted a
long-term analysis of your proposal to substantially change federal payments under
the Medicare and Medicaid programs, eliminate the subsidies to be provided through
new insurance exchanges under last year’s major health care legislation, leave Social
Security as it would be under current law, and set paths for all other federal spending
(excluding interest) and federal tax revenues at specified growth rates or percentages of
gross domestic product (GDP). The results of that analysis are summarized in the
attachment.
CBO has not reviewed legislative language for your proposal, so this analysis does not
represent a cost estimate for legislation that might implement the proposal. Rather, it
is an assessment of the broad, long-term budgetary impacts of the proposal, with
results spanning several decades and measured as a share of GDP. It is therefore quite
different from a cost estimate for legislation, which would require much more detailed
analysis, focus on the first 10 years, and be based on more recent baseline projections.
(CBO’s most recent long-term projections, which are the basis for this analysis,
were issued in June 2010 and were derived from the agency’s March 2010 baseline
projections.)
I hope this information is helpful to you. If you have any questions, please contact me
or CBO staff. The primary staff contact for this analysis is Joyce Manchester.

Sincerely,
Douglas W. Elmendorf

Attachment
cc: Honorable Chris Van Hollen
Ranking Member


D A T A B O O K Healthcare Spending and the Medicare Program

Long-Term Analysis of a Budget Proposal by Chairman Ryan
April 5, 201


On April 8, 2011, CBO corrected a
sentence on page 9, as noted ther

Over the  next several decades, the continued aging of the population and the growth
of health care costs will, under current law, almost certainly boost federal spending
significantly relative to the output of the economy. According to the Congressional
Budget Office’s (CBO’s) most recent long-term projections, which were issued in June
2010 and were based on the assumption that then-current law would generally remain
in place, spending on Social Security and the government’s major mandatory health
care programs—Medicare, Medicaid, the Children’s Health Insurance Program
(CHIP), and health insurance subsidies to be provided through insurance
exchanges—will increase from roughly 10 percent of gross domestic product (GDP)
today to about 15 percent 20 years from now.
1
 If revenues and federal spending apart
from those programs remain near their past levels relative to GDP, the increase in
spending on Social Security and the health care programs will lead to rapidly growing
budget deficits and mounting federal debt