ACA, healthcare programs partly responsible for higher federal deficit

By Bob Herman | January 19, 2016

Spending on Medicare, Medicaid and the Affordable Care Act’s insurance exchanges will rise by 11% in 2016, making healthcare a major reason why the federal deficit will increase this year, according to a new economic summary from the Congressional Budget Office.

CBO officials estimated Tuesday that this year’s federal deficit will be $544 billion, $105 billion more than the 2015 shortfall and the first increase of the federal deficit since 2009.

Within that calculation, mandatory expenses—such as Social Security and federal healthcare programs that have to be paid out—will be $168 billion higher in 2016, the CBO said. Healthcare will account for 62%, or $104 billion, of that spike.

Healthcare spending is projected to climb this year due in large part to more Medicaid spending. The ACA gave states the option to expand Medicaid eligibility to more low-income residents, and the CBO “boosted its projections of federal outlays for Medicaid to reflect higher-than-expected spending and enrollment for newly eligible beneficiaries.”

The White House recently said that President Barack Obama’s fiscal 2017 budget, to be released Feb. 9, will include a proposal to have the federal government assume 100% of the cost of Medicaid expansion for the first three years, no matter when a state implements the expansion.

CBO will publish more detailed information next week about the ACA and federal healthcare programs in its annual budget outlook.