The Congressional Budget Office ( CBO ) provided an example of the fiscal difficulties facing President Trump and the new Republican Congress on Friday before the inauguration day. The federal government’s estimated budget deficits of$ 21.8 trillion in the upcoming century were summarized in CBO’s monthly Budget and Economic Outlook.
One particular gem serves as an example of the problem, which the CBO has been warning about for decades about our dire economic future while the updated numbers just serve as information for lawmakers to keep paying. As an illustration of how privilege programs continue to stifle the federal budget, the budget gnomes considerably raised their Medicaid spending projections.
Double-Digit Rise in Medicaid
Appendix A, which contains all the changes — legislative, financial, and professional — to the macroeconomic foundation since CBO’s final update next June, contains a significant change in the last category. Among the technical” tweaks”, the budget office increased projected federal spending on Medicaid over the coming decade by$ 817 billion, or 12 percent. The Biden administration’s operational activities account for the majority of this anticipated increase in some way or another.
Continued rises in Medicaid admission, even after claims were finally able to remove participants from the spins following the epidemic ( something they couldn’t do during the Covid “emergency,” were one of the main factors driving the saving explosion. CBO increased projected admission for the calendar year 2025 from 79 million as of June next to 84 million. Additionally, it was noted that the enrollees who are still receiving Medicaid typically have poor health compared to those who were removed from the rolls last year, leading to” substantially higher than expected” costs per enrollee, which CBO believes will lead position Medicaid programs to increase their rates to the managed care plans that offer coverage.
Other factors contributed to the rise in the Medicaid spending estimates, including projected increases in enrollment among people with disabilities as a result of Biden’s rules expanding eligibility for the Supplemental Security Income program and rising drug costs, attributable in part to Biden’s recent proposal to require Medicaid programs to cover GLP-1 medications to combat obesity. Under Obamacare, CBO assumed a “modest increase in expected coverage expansions,” meaning more red states will choose to cover able-bodied adults ( which they should not do ).
Finally, the budget office assumed that a new Biden rule would increase Medicaid spending. A rule governing state-directed payments will, in particular, encourage states to raise reimbursement rates in order to obtain additional federal matching funds. Many of these requirements, which give examples of the executive branch spending money without the approval of Congress, should be repealed in a recent paper for the Paragon Health Institute.
Need to Reform Spending
The increase in Medicaid spending comes in the wake of persistent high deficits that have surpassed$ 2 trillion annually and, according to CBO, will only continue to grow. The national debt resulting from these accumulated deficits will account for 106 percent of our gross domestic product ( GDP ), an all-time high, surpassing levels just after World War II.
All of the numbers in the CBO report sound atrocious, but one stands out: Over the coming decade, the United States will spend a total of$ 13.8 trillion on interest payments alone. By the end of the decade, in 2035, CBO predicts net interest payments will “account for about one-sixth of all federal spending.” If you were to pay off the interest on your credit card with just the interest, you would be in bad financial shape, not the principal, of course, but the interest, on the other hand. In the years and decades to come, that is what the generation will face.
If there’s one silver lining, it’s that CBO had to release what it dubbed an “abbreviated” version of its Budget and Economic Outlook,” to facilitate work on other Congressional priorities” — most likely, various analyses of budget reconciliation provisions that the new Republican Congress may consider. Here’s hoping reconciliation legislation eventually includes efforts to lower, rather than increase, the spending that caused this situation.
