CBO's August 2010 Baseline: Medicare

By fiscal year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
MEDICARE TOTALS (in billions of dollars):
1
Mandatory Outlays 499.2 518.5 560.2 562.8 611.0 644.8 676.9 733.4 763.5 796.8 869.3 929.1
Discretionary Outlays 5.0 5.6 5.9 6.1 6.5 6.8 7.2 7.5 8.0 8.4 8.8 9.3
Total Outlays 504.2 524.1 566.1 568.9 617.4 651.6 684.1 740.9 771.4 805.2 878.1 938.4
2
Total Offsetting Receipts -73.9 -71.3 -77.5 -83.9 -89.4 -94.8 -100.2 -107.0 -113.5 -121.5 -131.5 -140.6

Net Outlays (Total Outlays - Receipts) 430.3 452.8 488.5 485.0 528.0 556.8 583.9 633.9 657.9 683.7 746.6 797.7
3
Net Mandatory Outlays (Mandatory Outlays - Receipts) 425.3 447.2 482.7 478.8 521.6 550.0 576.8 626.4 650.0 675.3 737.8 788.4

COMPONENTS OF MANDATORY OUTLAYS (in billions of dollars):

Benefits
Part A 239.8 250.3 267.3 270.9 286.0 298.7 307.1 325.1 336.5 350.7 372.8 391.5
Part B 204.2 207.6 219.1 220.7 239.5 251.6 265.0 282.9 296.4 311.7 334.8 358.6
Part D 53.0 58.2 71.4 69.1 83.5 92.5 102.6 123.3 128.5 132.3 159.7 176.9
Total Benefits 497.0 516.2 557.8 560.7 609.0 642.8 674.8 731.3 761.5 794.7 867.3 927.0

Mandatory Administration 4 2.1 2.3 2.4 2.1 2.0 2.0 2.2 2.1 2.0 2.1 2.0 2.1
Total Mandatory Outlays 499.1 518.5 560.2 562.8 611.0 644.8 677.0 733.4 763.5 796.8 869.3 929.1

Annual Growth Rates:

Mandatory Outlays 3.9% 8.0% 0.5% 8.6% 5.5% 5.0% 8.3% 4.1% 4.4% 9.1% 6.9%
Discretionary Outlays 12.2% 5.0% 4.5% 5.0% 5.2% 5.3% 5.5% 5.5% 5.3% 5.4% 5.3%
Total Outlays 4.0% 8.0% 0.5% 8.5% 5.5% 5.0% 8.3% 4.1% 4.4% 9.1% 6.9%
Total Offsetting Receipts -3.5% 8.7% 8.2% 6.5% 6.0% 5.7% 6.8% 6.1% 7.0% 8.3% 7.0%
Net Outlays (Total Outlays - Receipts) 5.2% 7.9% -0.7% 8.9% 5.5% 4.9% 8.6% 3.8% 3.9% 9.2% 6.8%
Net Mandatory Outlays (Mandatory Outlays - Receipts) 5.1% 7.9% -0.8% 8.9% 5.5% 4.9% 8.6% 3.8% 3.9% 9.3% 6.9%

Memorandum:
Number of Capitation Payments 5 12 12 13 11 12 12 12 13 12 11 12 12
6
Mandatory Benefits, net of recoveries, adjusted for timing shifts 487.4 509.1 535.8 567.4 600.6 633.8 665.0 704.7 748.8 800.5 854.8 913.8
Annual growth rate: 4.4% 5.2% 5.9% 5.8% 5.5% 4.9% 6.0% 6.3% 6.9% 6.8% 6.9%

Notes:
1. Average annual rate of growth of mandatory outlays from 2010 through 2020 is 6.0 percent.
2. Offsetting receipts include premiums, amounts paid to providers and later recovered, and phased-down state contribution (clawback) payments from the states to Part D.
3. Average annual rate of growth of net mandatory outlays from 2010 through 2020 is 5.8 percent.
4. Mandatory outlays for administration support quality improvement organizations, certain activities against fraud and abuse, and certain administrative activities funded in authorization acts. Mandatory outlays also
include payment of Part B premiums for qualifying individuals through 2010.
5. Capitation payments to group health plans and prescription drug plans for the month of October are accelerated into the preceding fiscal year when October 1st falls on a weekend.
6. Amounts that are paid to providers and later recovered are included in the total for mandatory Medicare spending, but the amounts are not broken out by type of provider. CBO counts the initial payment of such
amounts as outlays for benefits and the subsequent recovery as offsetting receipts to conform to the reporting in the Monthly Treasury Statement. In the past, the Medicare Trustees have reported benefits net of
recoveries, so they have not treated the recoveries as offsetting receipts.

Congressional Budget Office Page 1 of 7 August 25, 2010

CBO's August 2010 Baseline: Medicare
By fiscal year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
COMPONENTS OF BENEFITS PAYMENTS (in billions of dollars):

Hospital Inpatient Care 132.6 139.3 149.5 160.2 169.2 180.5 189.0 200.9 211.1 222.5 232.8 242.1
Skilled Nursing Facilities 25.8 26.2 28.4 30.4 32.7 35.4 38.6 41.7 44.6 47.3 50.1 53.1
Physician Fee Schedule 62.5 67.3 65.8 66.3 70.3 75.3 81.2 86.4 91.7 97.8 104.0 110.9
Hospital Outpatient Services 26.5 31.1 33.1 35.7 39.2 43.0 47.6 52.3 56.7 60.9 65.1 70.5
Group Plans (includes Medicare Advantage) 109.0 116.2 122.4 101.5 105.9 99.7 89.3 91.6 84.0 79.7 93.6 100.9
Home Health Agencies 18.3 19.6 21.1 23.1 25.3 27.9 30.8 33.4 36.7 40.4 44.1 48.0
Part D Benefits (prescription drugs) 1 53.0 58.2 71.4 69.1 83.5 92.5 102.6 123.3 128.5 132.3 159.7 176.9
Other Services 2 59.7 63.0 66.6 70.5 74.5 79.3 85.4 91.7 98.1 104.3 110.2 116.4
Not Allocated to Specific Services 0.0 -11.9 -8.0 -4.0 0.0 0.0 0.4 -0.3 -1.1 -2.4 -4.8 -5.1
Subtotal, Medicare Benefits, Net of Recoveries 487.4 509.1 550.4 552.8 600.6 633.8 665.0 720.8 750.3 782.9 854.8 913.8
3
Amounts Paid to Providers and Recovered 9.5 7.1 7.4 7.9 8.4 9.0 9.7 10.4 11.1 11.8 12.5 13.2
Total, Mandatory Medicare Benefit Outlays 497.0 516.2 557.8 560.7 609.0 642.8 674.8 731.3 761.5 794.7 867.3 927.0

Memorandum:
Not Allocated to Specific Services
Adjustments to reflect year-to-date spending in 2010 0.0 -11.9 -8.0 -4.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
4
Independent Payment Advisory Board (IPAB) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -1.1 -2.4 -4.8 -5.1
Medicare Improvement Fund (MIF) 0.0 0.0 0.0 0.0 0.0 0.0 0.4 0.1 0.0 0.0 0.0 0.0

5
ANNUAL GROWTH RATES FOR COMPONENTS OF BENEFITS PAYMENTS:

Hospital Inpatient Care 5.0% 7.3% 7.2% 5.6% 6.7% 4.7% 6.3% 5.1% 5.4% 4.6% 4.0%
Skilled Nursing Facilities 1.9% 8.0% 7.1% 7.7% 8.3% 9.1% 7.9% 6.9% 6.2% 5.8% 6.1%
Physician Fee Schedule 7.7% -2.3% 0.8% 6.0% 7.2% 7.8% 6.4% 6.1% 6.7% 6.3% 6.7%
Hospital Outpatient Services 17.2% 6.4% 7.8% 9.8% 9.8% 10.5% 9.9% 8.4% 7.5% 6.9% 8.4%
Group Plans (includes Medicare Advantage) 6.7% 5.4% -17.1% 4.3% -5.8% -10.4% 2.5% -8.3% -5.1% 17.5% 7.8%
Home Health Agencies 7.0% 7.7% 9.2% 9.5% 10.5% 10.4% 8.2% 10.1% 10.0% 9.2% 8.9%
Part D Benefits (prescription drugs) 1 10.0% 22.6% -3.2% 20.9% 10.8% 10.9% 20.1% 4.3% 2.9% 20.7% 10.8%
Other Services 2 5.5% 5.8% 5.8% 5.7% 6.4% 7.7% 7.3% 7.1% 6.3% 5.6% 5.6%

Total, Medicare Benefits Net of Recoveries 3 4.4% 8.1% 0.4% 8.6% 5.5% 4.9% 8.4% 4.1% 4.3% 9.2% 6.9%
Memorandum:
6
Medicare Benefits Net of Recoveries, adjusted to remove effect of timing shifts
Part A and Part B Fee-for-Service Benefits 2.8% 6.5% 7.2% 7.6% 7.4% 7.1% 7.0% 6.3% 6.1% 5.4% 5.7%
Parts A and B - Group Plans (includes Medicare Advantage) 6.7% -2.6% -2.2% -4.4% -5.8% -10.4% -5.3% -1.2% 4.1% 7.6% 7.8%
Part D Benefits 10.0% 13.4% 12.8% 12.1% 10.8% 10.9% 11.2% 11.7% 11.9% 12.0% 10.8%
Total Medicare Benefits 4.4% 5.2% 5.9% 5.8% 5.5% 4.9% 6.0% 6.3% 6.9% 6.8% 6.9%

Notes:
1. Includes payments to prescription drug plans, retiree drug subsidy, and low-income subsidy.
2. Includes hospice services; durable medical equipment; ambulance services; independent, physician in-office, and hospital outpatient department laboratory services; hospital outpatient services that are not paid for
using the prospective payment system (PPS), Part B prescription drugs; rural health clinic services; and outpatient dialysis.
3. See footnote 6 on page 1.
4. Under PPACA (P.L. 111-148) the IPAB is obligated to make changes to the Medicare program that will reduce spending if the rate of growth in spending is projected to exceed a target rate of growth linked to the
consumer price index and nominal gross domestic product. The effect of the IPAB shown here differs from estimates provided in CBO's March 20, 2010, cost estimate because the projected rate of growth in
spending has changed because of legislative, economic, and technical changes incorporated in the August 2010 baseline. Additionally, the target rate of growth changed because of the updated economic factors
used in this baseline.
5. The growth rates are calculated using benefits net of amounts paid to providers and later recovered.
6. The adjustment for timing shifts reflects 12 capitation payments per year.

Congressional Budget Office Page 2 of 7 August 25, 2010

CBO's August 2010 Baseline: Medicare
By fiscal year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
COMPARISON OF MEDICARE SPENDING AND DEDICATED FUNDING (in billions of dollars):
1
Total Medicare Outlays Included in Calculating the Funding Warning 499.2 521.9 550.8 583.6 618.2 653.0 686.2 727.9 774.3 828.7 886.0 948.2
2
Dedicated Medicare Financing Sources
Part A (HI) 207.5 204.8 212.4 226.4 251.2 272.5 290.3 307.1 323.6 340.3 357.4 375.0
Part B (SMI) 44.8 46.4 44.9 52.6 56.5 59.5 62.2 65.8 68.7 72.6 78.4 83.0
Part D (SMI) 14.3 11.3 16.5 20.3 22.7 25.2 28.0 31.4 35.4 40.0 45.3 50.7
Subtotal, Dedicated Medicare Financing Sources 266.6 262.5 273.8 299.3 330.4 357.2 380.5 404.3 427.7 453.0 481.1 508.6
General Revenue Medicare Funding 232.6 259.4 277.0 284.3 287.8 295.8 305.7 323.6 346.5 375.7 404.9 439.5
General Revenue Medicare Funding (percent of total outlays) 46.6% 49.7% 50.3% 48.7% 46.6% 45.3% 44.6% 44.5% 44.8% 45.3% 45.7% 46.4%
Excess General Revenue Medicare Funding (in percent) 3 1.6% 4.7% 5.3% 3.7% 1.6% 0.3% 0.0% none 0.0% 0.3% 0.7% 1.4%

STATUS OF HOSPITAL INSURANCE TRUST FUND (in billions of dollars):

HI Trust Fund Income
Receipts (mostly payroll taxes) 217.6 212.2 220.5 233.7 259.0 280.7 298.9 316.3 333.2 350.2 367.8 385.9
Interest 15.9 15.8 14.5 12.7 11.5 10.7 10.2 10.2 10.1 10.1 10.4 10.5
Total Income 233.5 228.0 235.1 246.5 270.5 291.4 309.1 326.5 343.4 360.3 378.1 396.4

HI Trust Fund Outlays 243.5 253.8 271.2 274.8 290.0 302.9 311.4 329.5 341.1 355.5 377.7 396.7
HI Trust Fund Surplus (+) or Deficit (-) 4 -9.1 -25.7 -35.6 -27.7 -18.9 -10.9 -1.7 -2.4 2.9 5.4 1.1 0.3
HI Trust Fund Balance (end of year) 309.8 284.1 248.6 220.8 201.9 191.0 189.2 186.8 189.7 195.1 196.2 196.5

ENROLLMENT: (average monthly enrollment during fiscal year, in millions)

Part A 45.4 46.3 47.5 49.1 50.6 52.1 53.6 55.2 56.8 58.4 60.1 61.8
Part B 42.3 43.1 44.2 45.6 46.9 48.3 49.6 51.0 52.4 53.9 55.5 57.1
5
Part D 33.1 34.2 35.3 36.7 38.0 39.3 40.7 42.1 43.6 45.2 46.8 48.5
Memo: Part D Low-Income Subsidy 10.0 10.4 10.7 11.1 11.4 11.8 12.2 12.5 12.9 13.3 13.7 14.2

Part A Fee-for-Service Enrollment 34.7 35.1 36.7 38.6 40.6 42.7 45.2 47.3 49.1 50.6 52.0 53.4
Group Plan Enrollment 6 10.7 11.2 10.8 10.5 10.0 9.4 8.5 7.9 7.7 7.8 8.1 8.5
Memo: Medicare Advantage 10.4 10.9 10.5 10.2 9.7 9.1 8.2 7.6 7.4 7.5 7.9 8.2

Share of Medicare Part A Enrollment:

Fee-for-service 76% 76% 77% 79% 80% 82% 84% 86% 86% 87% 86% 86%
Group plans (including Medicare Advantage) 6 24% 24% 23% 21% 20% 18% 16% 14% 14% 13% 14% 14%

Growth in Part A Enrollment: 2.0% 2.7% 3.2% 3.1% 3.0% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%
Fee-for-service 1.1% 4.7% 5.1% 5.3% 5.3% 5.7% 4.6% 3.8% 3.1% 2.7% 2.7%
Group plans (including Medicare Advantage) 5.2% -3.6% -3.0% -4.7% -6.3% -10.0% -6.4% -2.8% 1.3% 4.3% 4.4%

Notes:
HI = Hospital Insurance (Part A of Medicare); SMI = Supplementary Medical Insurance (Parts B and D of Medicare).
1. Total Medicare Outlays used to calculate the funding warning differ from "Total Outlays" shown on page 1 because they exclude amounts paid to providers that are later recovered (see footnote 6 on page 1), adjust
for differences in numbers of capitated payments each year, and include the basic premiums for Part D that are paid directly to Part D plans by beneficiaries who choose not to have those premiums withheld from
their Social Security benefits.
2. Dedicated sources of revenue include Medicare payroll taxes, the Medicare share of taxes on certain Social Security benefits, Part D phased-down state contribution (clawback) payments by states, and beneficiary
premiums paid from nonfederal sources. However, dedicated revenues do not include offsetting receipts paid with federal funds or amounts recovered from providers.
3. The Excess General Revenue Medicare Funding Warning is triggered when the general revenue requirement exceeds 45 percent.
4. Surpluses and deficits reflect income minus outlays for each year. Deficits are denoted by negative numbers.
5. Includes individuals enrolled in stand-alone prescription drug plans, Medicare Advantage plans with prescription drug coverage, and the retiree drug subsidy.
6. Includes Medicare Advantage, cost contracts, and demonstration contracts covering Medicare Parts A and B. Does not include Health Care Prepayment Plans (HCPPs), which cover Part B services only.

Congressional Budget Office Page 3 of 7 August 25, 2010

CBO's August 2010 Baseline: Medicare
By fiscal year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
OFFSETTING RECEIPTS (in billions of dollars):
Part A Premiums -2.8 -3.2 -3.3 -3.4 -3.4 -3.5 -3.5 -3.6 -3.6 -3.7 -3.8 -3.9
Part B Premiums 1 -51.9 -54.7 -57.0 -60.3 -64.0 -67.4 -70.8 -75.1 -78.8 -83.6 -90.3 -95.9
2
Part D Premiums -2.2 -2.3 -3.2 -3.7 -4.3 -4.9 -5.5 -6.3 -7.2 -8.3 -9.5 -10.8
3
Part D Payments by States -7.5 -4.0 -6.7 -8.7 -9.3 -10.0 -10.7 -11.6 -12.7 -14.0 -15.4 -16.9
4
Amounts Paid to Providers and Recovered -9.5 -7.1 -7.4 -7.9 -8.4 -9.0 -9.7 -10.4 -11.1 -11.8 -12.5 -13.2
Subtotal, Offsetting Receipts -73.9 -71.3 -77.5 -83.9 -89.4 -94.8 -100.2 -107.0 -113.5 -121.5 -131.5 -140.6

Offsetting Receipts Paid With Federal Funds

Federal Share of Medicaid Payments of Part A Premiums 2.4 2.5 3.0 1.9 2.0 2.1 2.1 2.2 2.4 2.5 2.6 2.8
Federal Share of Medicaid Payments of Part B Premiums 7.0 8.2 12.2 7.7 7.5 8.0 8.6 9.3 10.1 10.9 11.8 12.9
Subtotal, Offsetting Receipts Paid With Federal Funds 9.4 10.7 15.1 9.6 9.5 10.0 10.7 11.5 12.5 13.4 14.5 15.6

Net Offsetting Receipts from Nonfederal Sources -64.5 -60.6 -62.4 -74.3 -79.9 -84.7 -89.5 -95.4 -101.0 -108.0 -117.0 -125.0

COMPONENTS OF HOSPITAL INPATIENT PAYMENTS (in billions of dollars):

Inpatient Operating and Capital-related Payments 111.2 117.1 126.1 135.5 143.2 152.8 163.2 173.6 182.9 192.3 201.7 209.4
5
Disproportionate Share 10.4 10.8 11.5 12.2 12.9 13.8 10.9 11.5 11.6 12.8 13.0 13.7
Indirect Medical Education 5, 6 6.2 6.3 6.7 7.1 7.5 8.1 8.7 9.4 9.9 10.5 11.0 11.5
Graduate Medical Education 6 3.1 3.2 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.8 3.9 4.0
Other, including bad debt 1.8 1.9 2.0 2.1 2.2 2.4 2.6 2.8 2.9 3.1 3.2 3.4

PAYMENT UPDATES AND CHANGES IN PRICE INDEXES:

Part A: (fiscal year)
PPS Market Basket Increase 3.6% 2.1% 2.6% 2.1% 2.4% 2.7% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9%
PPS Update Factor 7 3.6% 1.9% 2.4% 0.7% 1.0% 1.3% 1.7% 1.7% 1.1% 1.1% 1.0% 1.7%

Part B: (calendar year)

Physician Medicare Economic Index (MEI) 1.6% 1.2% 0.3% 0.3% 0.5% 1.1% 1.9% 2.3% 2.8% 2.5% 2.4% 2.2%
CPI-U 5.0% 0.0% 0.8% 1.1% 1.4% 1.7% 1.9% 2.2% 2.3% 2.3% 2.3% 2.3%

Notes:
CPI-U = consumer price index for urban consumers; PPS = prospective payment system.
1. Part B premium receipts include the income-related premium.
2. Does not include premiums that enrollees pay directly to their plans or premiums covered by the low-income subsidy.
3. Reflects a March 2010 decision by the Department of Health and Human Services that reduces the phased-down state contributions that are used to offset some of the federal government’s spending for Part D.
4. The Monthly Treasury Statement classifies the recovery of amounts paid to providers as offsetting receipts. CBO has adopted that classification. (Also see footnote 6 on page 1.)
5. Included in inpatient operating and capital-related payments.
6. Includes subsidies for medical education that are paid to hospitals that treat patients enrolled in Medicare Advantage plans.
7. The PPS update factor fiscal year 2010 applies to discharges occuring on or after April 1, 2010.

Congressional Budget Office Page 4 of 7 August 25, 2010

 FAQs for the August 2010 Update of CBO’s Medicare Baseline

What is the August Baseline? The August baseline for Medicare updates CBO’s
projections under current law of spending over the 2010-2020 period. CBO’s prior
baseline for that period was published in March of 2010. The update incorporates the
effects of CBO’s most recent economic forecast, legislation enacted since the
completion of the prior baseline, certain actions implemented or announced by the
Administration, and data on Medicare spending through late-July.

Which new laws have been incorporated in this baseline?

 P.L. 111-148, the Patient Protection and Affordable Care Act;

 P.L. 111-152, the Health Care and Education Reconciliation Act of 2010;
 P.L. 111-157, the Continuing Extension Act;
 P.L. 111-192, the Preservation of Access to Care for Medicare Beneficiaries and
Pension Relief Act; and
 P.L. 111-226, legislation providing aid to states.1

Has CBO reestimated the effect of those laws on Medicare spending? No. The
baseline reflects “current law,” so legislation enacted since March has been
incorporated into CBO’s baseline. The baseline was also updated for economic and
technical changes. Those changes are not re-estimates of legislation, but rather
modifications to CBO’s baseline based on new data about current year spending and
projections of economic factors. It is generally not possible to isolate the effects of
economic and technical changes in the baseline on estimates of recently enacted
legislation.

In the future, will it be possible to compare CBO’s estimates for the Medicare
provisions of recently enacted legislation to actual results? As a general matter,
no. Making such a comparison will be possible only if the legislation created a new
activity for which the spending will be tracked separately. While such tracking might be
feasible for some provisions—such as mandatory appropriations for certain
administrative activities—it will not be possible for the provisions that account for nearly
all of the estimated changes in Medicare spending. In the Budget and Economic
Outlook: An Update, CBO disaggregated changes in the baseline projections into
economic, legislative, and technical components. For Medicare, the legislative changes
equal CBO’s original estimates. (For Public Laws 111-148 and 111-152, CBO’s original

                                                            
1
 P.L. 111‐226 provides grants to states for teachers’ salaries and extends and modifies an increase in the federal 
share of Medicaid costs that was scheduled to expire in December 2010. 

Congressional Budget Office Page 5 of 7 August 25, 2010

estimates extended through 2019; the legislative change for Medicare in 2020 is a
simple extrapolation of the original estimates.)

Is the August baseline a “scoring baseline?” No. For the remainder of the 111th
Congress, CBO will continue to produce estimates using the technical and economic
assumptions underlying its March 2010 baseline, as applied to current law. “As applied
to current law” means that CBO’s estimates will take into account legislation enacted
since the March 2010 baseline was produced, and they will take into account certain
administrative actions (such as rate-setting announcements).

Are there significant changes in the information CBO provides on its Medicare
baseline? There are two significant changes from the previous version of the attached
table:

 The “Components of Benefits Payments” section on page 2 of the table includes

significant amounts that are “Not Allocated to Specific Services,” and
 The table does not include projections of monthly premium amounts.

Why does the table show spending for benefits that is “Not Allocated to Specific
Services”? The August 2010 baseline for Medicare includes substantial amounts that
CBO cannot prospectively assign to projected spending for particular types of services:

 Adjustments to reflect year-to-date spending in 2010,

 The effect of actions by the Independent Payment Advisory Board (IPAB), and
 How the Secretary of Health and Human Services decides to use amounts
available in the Medicare Improvement Fund (MIF).

Year-to-date spending. From January through late July 2010, spending by Part B of
Medicare has been noticeably lower than CBO expected. As a result, projected Part B
spending for fiscal year 2010 in the August baseline is about $12 billion lower than we
would otherwise expect. We do not know how the effects of that reduction are
distributed across types of service in Part B. Nor are we sure how much of that
slowdown reflects an actual reduction in use of services and how much is related to
slower submission and processing of claims. The August 2010 baseline incorporates
the assumption that the effects of the reduction will fade over the next few years.

IPAB and MIF. CBO does not know how the IPAB will decide to meet its obligation to
find savings or how the Secretary will decide to use MIF funds. Therefore, we cannot
predict how the effects of those decisions on spending will be distributed across
providers and types of services.

Congressional Budget Office Page 6 of 7 August 25, 2010

Why doesn’t CBO project the monthly amount of Part B premiums? Premiums for
Part B of Medicare are required to be set at a level that covers 25 percent of the costs
of Part B, with the balance of costs paid from the general fund of the Treasury. (This
discussion pertains to the basic Part B premium, not to the income-related premium that
is paid by certain beneficiaries with relatively high incomes.)

Most Medicare enrollees have their Part B premium withheld from their monthly Social
Security benefit. For those individuals, a “hold-harmless” provision guarantees that a
benefit check will not decrease as a result of an increase in the Part B premium. In 2010
and, CBO projects, in 2011, the cost-of-living adjustment (COLA) to the Social Security
benefit will be zero. Therefore, beneficiaries enrolled in Medicare in 2009 who are
subject to the hold-harmless provision are projected to pay the same premium in 2011
that they paid in 2009 ($96.40).

The Medicare actuaries are required to set premiums to cover 25 percent of program
costs. Premiums for beneficiaries subject to the hold-harmless provision cannot be
increased to meet this requirement, but the actuaries have substantial discretion in
setting premium levels for various groups of beneficiaries. These groups include new
enrollees, beneficiaries whose premiums are paid by state Medicaid programs, and
beneficiaries who pay premiums based on income. It is not possible for CBO to predict
with reasonable accuracy the amount of the monthly premium that will paid by different
types of beneficiaries during the years when the COLA is zero or very small. Providing
an average monthly premium amount would not reflect the actual premium amounts
paid by most beneficiaries.

Congressional Budget Office Page 7 of 7 August 25, 2010

 Spending and Enrollment Detail for CBO's August 2010 Baseline: Medicaid
Avg. annual
Fiscal year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 rate of growth
2011-15 2011-20

Federal Medicaid Payments (Outlays in Billions of Dollars) /1/

Benefits
Acute care
Fee-for-service 103.6 102.5 94.1 100.3 126.9 151.0 175.9 191.3 201.8 214.4 225.3 8% 8%
Managed care 58.0 59.0 57.1 58.6 67.6 77.5 87.6 94.8 100.7 107.2 113.3 6% 7%
Medicare premiums 7.7 9.7 9.6 9.5 10.0 10.7 11.5 12.4 13.4 14.4 15.5 7% 7%
Long-term care 80.9 81.6 78.1 84.7 92.2 100.7 110.3 119.7 130.1 140.9 152.8 4% 7%
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Subtotal 250.3 252.9 238.9 253.1 296.7 339.9 385.3 418.3 445.9 476.9 506.9 6% 7%

Disproportionate Share Hospital 8.1 8.7 8.9 9.0 8.6 8.8 9.0 8.1 5.1 4.9 6.8 2% -2%
Vaccines for Children 3.4 3.5 3.6 3.8 4.1 4.4 4.7 5.0 5.3 5.7 6.1 5% 6%
Administration 10.9 11.1 12.0 12.7 14.1 15.6 17.1 18.4 19.5 20.8 22.0 7% 7%
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total 272.7 276.2 263.4 278.7 323.6 368.6 416.2 449.8 475.9 508.2 541.7 6% 7%

Percentage Change in Federal Medicaid Payments

Benefits
Acute care
Fee-for-service 10% -1% -8% 7% 27% 19% 16% 9% 5% 6% 5%
Managed care 10% 2% -3% 3% 15% 15% 13% 8% 6% 6% 6%
Medicare premiums 16% 26% -1% -1% 5% 7% 8% 8% 8% 7% 8%
Long-term care 8% 1% -4% 9% 9% 9% 9% 9% 9% 8% 8%
Subtotal 9% 1% -6% 6% 17% 15% 13% 9% 7% 7% 6%
Disproportionate Share Hospital -7% 8% 2% 2% -4% 1% 3% -10% -36% -6% 39%
Vaccines for Children 9% 2% 3% 5% 8% 7% 7% 7% 7% 7% 7%
Administration 6% 2% 7% 6% 11% 10% 10% 8% 6% 7% 6%
Total 9% 1% -5% 6% 16% 14% 13% 8% 6% 7% 7%

Federal Benefit Payments by Eligibility Category (Outlays in Billions of Dollars)

Aged 52.6 53.6 51.3 55.2 59.7 64.7 70.6 76.7 83.3 90.2 97.9 4% 6%
Blind and disabled 107.2 111.2 109.4 118.6 127.7 136.6 147.2 158.0 169.3 181.4 194.9 5% 6%
Children 53.9 53.4 46.9 47.7 50.6 54.4 60.0 64.6 69.0 74.0 79.4 0% 4%
Adults 36.6 34.8 31.3 31.6 58.7 84.2 107.5 119.0 124.3 131.2 134.6 18% 14%
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total 250.3 252.9 238.9 253.1 296.7 339.9 385.3 418.3 445.9 476.9 506.9 6% 7%

Enrollment by Eligibility Category (Millions of People) /2/

Aged 5.9 6.1 6.2 6.4 6.6 6.8 7.0 7.2 7.4 7.6 7.8 3% 3%
Blind and disabled 10.4 10.8 11.1 11.4 11.6 11.9 12.1 12.3 12.4 12.6 12.9 3% 2%
Children 35.8 34.5 32.9 31.2 33.1 33.8 35.5 36.1 36.6 37.2 37.8 -1% 1%
Adults 19.3 18.7 18.1 17.4 26.6 31.0 35.9 37.0 37.8 38.3 38.8 10% 7%
_____ _____ _____ _____ _____ _____ _____ _____ _____ _____ _____
Total 71.3 70.0 68.4 66.4 78.0 83.5 90.4 92.5 94.2 95.7 97.2 3% 3%

Memo: Average monthly enrollment 57.7 56.9 55.6 54.1 62.8 66.9 72.2 73.8 75.2 76.4 77.6 3% 3%

Average Federal Spending on Benefit Payments per Enrollee /3/

Aged $12,178 $12,110 $11,273 $11,759 $12,367 $13,042 $13,852 $14,621 $15,431 $16,255 $17,159 1% 3%
Blind and disabled $11,087 $11,076 $10,554 $11,183 $11,769 $12,355 $13,091 $13,826 $14,583 $15,383 $16,257 2% 4%
Children $1,543 $1,593 $1,462 $1,573 $1,573 $1,654 $1,734 $1,835 $1,936 $2,047 $2,158 1% 3%
Adults $2,055 $2,012 $1,874 $1,981 $2,375 $2,928 $3,226 $3,450 $3,535 $3,684 $3,727 7% 6%

Notes:

/1/ The American Recovery and Reinvestment Act of 2009 provides states with additional federal financial assistance through December 2010. As a result, the
average federal share of Medicaid payments for FY 2010 is 68 percent. Subsequent legislation (P.L. 111-226) continued enhanced matching rates for an additional
six months leading to an average rate of about 64 percent. On average from FY 2012 to FY 2013, federal Medicaid payments represent approximately 57 percent of
total Medicaid payments. The Patient Protection and Affordable Care Act, which expands Medicaid coverage starting in 2014, provides enhanced federal matching
rates for certain populations, leading to an average federal share for Medicaid ranging between 60 percent and 62 percent, depending on the year.

/2/ These figures are the total number of individuals enrolled in Medicaid at any point during the fiscal year and include enrollment in the territories. Some
beneficiaries are enrolled for only part of the year; enrollment on an average monthly basis, as shown in the memo line, would be about 80 percent of these figures.

/3/ These figures are based on the annual cost of enrollees who receive the full Medicaid benefit package and exclude those who receive only partial Medicaid
benefits, such as family planning services or assistance with Medicare cost sharing and premiums.

Congressional Budget Office Page 1 of 1 August 25, 2010

Spending and Enrollment Detail for CBO's August 2010 Baseline: Children's Health Insurance Program (CHIP)

Fiscal Year 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-15 2011-20

Federal CHIP Funding (Billions of Dollars)

Budget Authority /1/ 12.6 13.5 15.0 17.5 19.2 21.1 5.7 5.7 5.7 5.7 5.7 86.3 114.9
Outlays 8.0 8.7 8.6 8.5 8.8 9.4 10.1 8.5 5.7 5.7 5.7 43.9 79.8

Memo:
Contingency Fund Payments 0 0 0 0 0 0 0 0 0 0 0
Performance Bonus Payments 0.1 0.3 0.1 * 0 0 0 0 0 0 0
Remaining Unused Budget Authority 7.3 7.4 6.8 6.7 7.5 7.4 3.0 * 0 0 0
(end of year)
CHIP Child Per Capita, Enrollees $815 $853 $893 $932 $971 $1,020 $1,433 $1,517 $1,596 $1,652 $1,739
(federal share) /2/

Enrollment (Millions of People) /3/

Enrollment under Baseline Funding Levels Avg. Annual Growth

Children and Pregnant Women 8.9 8.9 8.6 8.2 8.3 8.4 7.5 6.1 3.8 3.7 3.5 -1% -10%
Parents of Children Enrolled in 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.1 0.1 0.1 0.1
Medicaid or CHIP
Adults without Children * 0 0 0 0 0 0 0 0 0 0
___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___
Total 9.1 9.1 8.8 8.4 8.5 8.6 7.7 6.3 3.9 3.8 3.6 -1% -10%

Average Monthly Enrollment 5.7 5.7 5.5 5.2 5.3 5.3 4.8 3.9 2.4 2.3 2.2 -1% -10%

Notes:

* = costs or savings of less than $50 million or fewer than 50,000 enrollees.

/1/ Title XXI of the Social Security Act authorizes CHIP through September 2015. Consistent with statutory guidelines, CBO assumes in its baseline spending projections that
funding for the program in later years will continue at $5.7 billion.

/2/ CHIP Child Per Capita reflects the 23 percentage-point increase in the Federal Medical Assistance Percentage in fiscal years 2016 through 2020 included in the Patient
Protection and Affordable Care Act (PPACA).

/3/ These figures represent the total number of individuals enrolled in CHIP at any point during the fiscal year. Some beneficiaries are enrolled for only part of the year; enrollment
on an average monthly basis would be about 60 percent of these figures. These figures include enrollment in the 50 states and the District of Columbia, but do not include
enrollment in the U.S. territories. Beginning in 2016, the 23 percentage-point increase in the Federal Medical Assistance Percentage for CHIP results in quicker spending of the
allotments due to a higher federal cost per beneficiary.

Congressional Budget Office Page 1 of 1 August 25, 2010

CBO's August 2010 Baseline: Health Insurance Exchanges

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-15 2011-20

EXCHANGE ENROLLMENT /a Millions of People, by Calendar Year

Individually Purchased Coverage

Subsidized 0.0 0.0 0.0 7.1 10.8 16.9 17.8 19.3 19.3 19.1
Unsubsidized /b 0.0 0.0 0.0 1.6 2.8 4.7 5.0 5.4 5.4 5.4
TOTAL 0.0 0.0 0.0 8.6 13.6 21.6 22.9 24.7 24.7 24.6

Employment-Based Coverage
Purchased Through Exchanges /b 0.0 0.0 0.0 5.2 3.2 3.6 4.6 4.5 4.5 4.6

DIRECT SPENDING Billions of Dollars, by Fiscal Year

Premium Credit Outlays /c 0.0 0.0 0.0 11.0 26.0 45.1 56.2 64.0 69.0 72.2 37.0 343.5
Cost-Sharing Subsidies 0.0 0.0 0.0 3.4 7.5 12.2 14.7 16.5 18.1 18.9 11.0 91.4
Related Spending /d 1.7 2.2 2.4 1.0 0.1 * * * 0.0 0.0 7.4 7.5
TOTAL 1.7 2.2 2.4 15.4 33.7 57.4 71.0 80.5 87.1 91.1 55.4 442.4

ADDITIONAL INFORMATION

Premium Credit Revenue Reductions ($ Billions) /c 0.0 0.0 0.0 5.3 11.7 18.2 21.3 24.3 26.0 27.2 16.9 133.9
Total, Exchange Subsidies & Related Spending 1.7 2.2 2.4 20.7 45.4 75.6 92.3 104.8 113.0 118.3 72.3 576.3

Total Exchange Subsidies by Calendar Year ($ Billions) /c 28.1 52.6 85.5 95.4 109.0 115.0 119.8
Average Exchange Subsidy per Subsidized Enrollee ($) 3,970 4,860 5,070 5,350 5,640 5,950 6,260

NOTES: Components may not sum to totals because of rounding; * = less than $50 million.

a. Figures represent average monthly enrollment and include spouses and dependents covered by family policies.
b. Does not include coverage purchased directly from insurers outside of the exchange system.
c. Includes the effects on premium credits of provisions regarding non-retiree reinsurance, administrative simplification, and follow-on biologics.
d. Includes mandatory outlays for high-risk pools, premium review activities, loans to co-op plans, and administration of insurance exchanges.

Congressional Budget Office August 25, 2010