Despite broad efforts since 2009 to increase the availability of health insurance and access to health care for underserved populations, low-income people are remaining sicker than higher-income people and that health inequity gap continues to grow. That’s according to José Escarce, MD, PhD, the guest speaker at the April 2 annual Leonard Davis Institute of Health Economics (LDI) Samuel P. Martin III Memorial Lecture.

A Penn alumnus, Escarce’s presentation was based on his study entitled, “Income-Related Inequity in Health Care Delivery: Concept, Measurement, and Recent Trends Among Working-Age Americans.” His Martin Lecture was simultaneously the second-day event in the four-day Penn Medicine Health Equity Week Conference, an annual event designed to facilitate discussions focused on advancing health equity. The LDI lecture was co-hosted by the Penn Division of General Internal Medicine and the National Clinician Scholars Program.

Denial of Care

“Disparity in health is increasing dramatically over a really brief period of time,” said Escarce, a Professor of Medicine in the David Geffen School of Medicine at UCLA, a Professor of Health Policy and Management in the UCLA Fielding School of Public Health, and a Senior Natural Scientist at RAND. “Why is this so? Well, the quality of insurance likely matters. Medicaid may fail to provide adequate access to costly services. The spread of Medicaid managed care in particular. Well over 70% or 80% of patients on Medicaid are in Medicaid managed care, a program that is notorious for denying access to expensive things. In fact, a recent Government Accountability Office (GAO) report explained how states have not implemented systems to monitor denials of care by Medicaid managed care organizations, whereas the federal government has done that for Medicare managed care organizations.”

“Additionally, there’s the spread of high deductible health plans, which are slightly more common among low-income people and are fighting against the reduction in health status inequity,” Escarce continued. “Beyond insurance it’s also about the social determinants — not of health but of health care. There are so many sociological barriers to getting health care, and those aren’t going to go away because you get people insurance. It’s also worth noting that the dramatic decline in health among low-income Americans, relative to their more affluent peers, speaks to the multifaceted crises that these Americans face, like in the labor market in earnings and stagnant wages, in health behaviors and other negative factors that are playing out in their health.”

Income Inequality Impact

“There’s also the effect of growth in income inequality which can worsen inequity in health care,” said Escarce. “Income inequality has grown in the United States over this period of time and is working against efforts to achieve reductions in health care inequity.”

“Focusing on Medicare expenditures, the 2019 observed concentration index (of our study) would imply that the high-income individuals would get $5,578 per person, and low-income people would get $5,468 per person,” Escarce said. “But if you look at the adjusted index, which is the one that accounts for health status, high-income individuals should get $4,584 per person, and the low-income people should get $6,462 per person. The difference between what they would get in this situation is almost $1,000. So, these small inequity indices translate to huge differences in the amount of care that people actually get.”

The Samuel P. Martin, III, MD Memorial Lecture series honors the legacy of a University of Pennsylvania physician and administrator who believed that American medicine had underachieved in harnessing its vast resources to serve the health care needs of the nation and who devoted his career to addressing the issue of how that could be changed.

Escarce is currently working on several projects that address socio-demographic barriers to access in managed care organizations and is the principal investigator of a program project entitled “Health Care Markets and Vulnerable Populations,” which uses the Medical Expenditure Panel Survey (MEPS) and is funded by the Agency for Healthcare Research and Quality (AHRQ). Among other issues, the program project addresses racial and ethnic differences in access to and quality of medical care.

Previous Day Health Equity Panel: Women of Color

The previous day’s Penn Medicine Health Equity Week event was a panel moderated by LDI Senior Fellow Jaya Aysola, MD, DTMH, MPH, Assistant Dean of Inclusion and Diversity and Associate Professor of Medicine and of Pediatrics at the Perelman School of Medicine. She is also the Founder and Executive Director of Penn Medicine’s Center for Health Equity Advancement (CHEA). The panelists included Penn Medicine nurses Larissa Morgan, MSN, RN-BC; Rebecca Trotta, PhD, RN; Felicia Morrison, MSN, MBA, RN; and Andrea Blount, MPH, BSN.

The panel marked the first collaboration between the Center for Health Equity Advancement and the Abramson Center for Nursing Excellence.

Entitled “The Path for Women of Color to Ascend in Health Care,” the session was focused on an underway study focused on defining the factors that impede advancement of female nurses of color to executive leadership. Launched in 2020, the pilot study’s goal is to produce recommendations to improve advancement of women of color (WOC), peer-reviewed publications on related themes, and a “playbook” for WOC advancement based on critical insights from the study’s analyses.

Over 53% of the women who held health care CEO roles had a clinical background, and 43.9% of them were nurses. However, Black, Indigenous, and People of Color who make up 23.6% of the nursing workforce account for only 19% of first- and mid-level managers, 14% of hospital board members, and 11% of executive leaders.

“The stats are clear,” said Aysola. “There is a gap that is important to highlight in terms of advancing women of color not only in our nursing workforce but all the way up into executive leadership. Nurses represent the backbone of most of our health care systems and it’s important to honor their voices as we make changes towards advancing equity.”

More than one in five Americans rely on Medicaid, which is now the nation's largest health insurer.

Worryingly, these Americans may soon lose access to certain life-saving medicines because of a well-intentioned, but poorly designed, regulatory change that federal officials seem intent on advancing.

For more than 30 years, Medicaid's "best price" rule has made a simple and reasonable demand of drugmakers: Give Medicaid your lowest price or pay Medicaid a rebate of 23.1 percent of the "average manufacturer price" that's paid by retail pharmacies and wholesalers.

Especially for expensive drugs still under patent and less likely to be available at cut-rate prices, that minimum 23.1 percent discount helps poor Americans get the medications they need at a cost that's reasonable for taxpayers.

Sure, there are some technical aspects of all the definitions and procedures associated with the current rule that keep plenty of lawyers and accountants busy. But the basic idea is clear: Drugmakers don't get to excessively profit off the Medicaid population by charging the program more than they charge any other buyer.

Even though this formula is working reasonably well, officials now want to change it.

Instead of requiring drugmakers to offer Medicaid the best price available to any other single buyer—whether it's a commercial insurer, a hospital, a drug wholesaler, or a pharmacy benefit manager (PBM)—officials want the Medicaid price to reflect all the discounts given to those other entities combined.

The net effect would be lower Medicaid drug costs. In theory, that's a good thing. Who wouldn't want Medicaid to secure a better deal for beneficiaries and taxpayers?

But in practice, the proposed rule would prove almost impossible to implement and enforce—due, in part, to ongoing obfuscation by pharmacy benefit managers.

These secretive middlemen oversee the details of prescription drug benefits for most insurance plans, including the Medicaid "managed care" plans administered by private insurers. PBMs have deliberately made the drug supply chain as opaque and complex as possible in order to protect their tens of billions in annual profits.

There is currently no system in place to track the separate entities that handle a drug as it moves through the byzantine supply chain—and therefore no way to collect data on discounts at each "stop" (pharmacy benefit managers, insurers, wholesalers) along the way from manufacturer to patients. Drug companies often aren't even aware of the contract terms between retail pharmacies and PBMs.

Simply put, the numerous hurdles PBMs have introduced into the system of drug procurement—every one of which is also a tollbooth contributing to their bottom lines—have made it challenging to collect the information Medicaid wants.

A reform proposal worthy of consideration would start by asking PBMs what they do to actually benefit the Medicaid program as a whole and patients in particular. Spoiler alert: The answer is nothing.

Instead the proposal heaps the burden of demonstrating compliance on drugmakers and creates more paperwork for federal officials, further depleting essential resources that should be going to care for Medicaid beneficiaries.

A reform proposal worthy of consideration would start by asking PBMs what they do to actually benefit the Medicaid program as a whole and patients in particular. Spoiler alert: The answer is nothing.

Instead the proposal heaps the burden of demonstrating compliance on drugmakers and creates more paperwork for federal officials, further depleting essential resources that should be going to care for Medicaid beneficiaries.

Consider ailments like sickle-cell disease. Over 93 percent of patients hospitalized with the condition are Black. Just a few months ago, two biotech companies rolled out new gene therapies for sickle cell disease.

Would biotech companies research such conditions if the proposed rule were in effect? Or would firms instead opt to develop drugs for privately insured—and thus more lucrative—patient populations instead? The answer is obvious.

Medicaid is hardly perfect. Many doctors won't accept Medicaid patients, which leads to long wait times at the providers who do participate in the program. Enrolling, and staying enrolled, forces the poorest and most vulnerable Americans to navigate a considerable amount of red tape and paperwork.

But within the program, prescription drug coverage is a bright spot. By law, virtually every FDA-approved medicine is available to Medicaid enrollees at little to no cost. And the existing "best price" rule enables Medicaid to devote just 5.6 percent of its total spending towards prescription drugs—whereas in the health care system as a whole, prescription drugs account for about 11 percent of total spending.

When there are so many broken components of our health care system, and Medicaid specifically, that deserve attention, it's bizarre that federal officials are looking to overhaul the one piece of the program that's indisputably successful. Those officials would be wise to refocus their attention on rent-seeking middlemen—before their plan wreaks unintended consequences on the most vulnerable Americans.

Almost all community health centers (95%) are reporting Medicaid disenrollment, influencing the level of care provided to individuals that rely on these locations.

Three-quarters of people who have lost Medicaid coverage are still disenrolled, a new survey of national community health centers finds. Many of these individuals are likely unable to find commercial health insurance.

A breakdown of Medicaid disenrollees from community health centers shows the widespread impact. Of the affected individuals, 32% have chronic conditions, 24% are children, 12% were adults older than 65 years of age and 12% had disabilities.

The analysis was conducted by the National Association of Community Health Centers and the George Washington University's Geiger Gibson Program in Community Health from January to February 2024.

“Health centers are sounding the alarm on unwinding with nearly a quarter of their Medicaid patients, including children and older adults, losing coverage,” said Peter Shin, Ph.D., research director of the Geiger Gibson Program, in a news release. “The reported proportion of patients who are not seeking care or continuing treatment is also substantial and highly concerning.”

During the public health emergency, Medicaid enrollment increased more than 30% to over 23 million people. States began the unwinding process April 1, 2023, and enrollment now sits at 85 million people, said Jennifer Tolbert, director of state health reform for KFF, in a recent webinar on the unwinding's impact.

Enrollment has declined in all states except Hawaii, due to a procedural pause brought on by the Maui wildfires in August, but states are at different levels of processing renewals and enrollment varies greatly.

"We find mild, but positive, correlation between the number of e14 waivers a state has adopted and enrollment decline," she explained.

These waivers can increase ex parte (automatic) renewals, help enrollees submit renewal forms, update contact information or facilitate reenrollment for people affected by procedural terminations, KFF reported. Only Florida has not utilized any waivers.

She expects the Centers for Medicare & Medicaid Services to release a timeline showing each state's progress soon, though some states likely won't be done with the unwinding process until the fall.

After two years of experimentation with addressing people’s social needs with services like food, housing, and transportation through Medicaid, the North Carolina Department of Health and Human Services (NCDHHS) is planning to expand the services statewide.

More than 288,000 services have been delivered and more than 20,000 NC Medicaid beneficiaries have enrolled across 33 predominantly rural counties in North Carolina as part of the Healthy Opportunities Pilots since the program began providing services two years ago. 

The Centers for Medicare and Medicaid Services (CMS) approved the Healthy Opportunities Pilots in 2018 as part of the state’s waiver to transition to Medicaid managed care. Also, North Carolina expanded who can get Medicaid starting Dec. 1, 2023. Enrollment has surpassed 400,000 in the expansion program’s first four months.

North Carolina says that preliminary research from the program’s independent evaluation shows the state is spending about $85 less in medical costs per Healthy Opportunities Pilots beneficiary per month. 

Those findings also show participants avoided a significant number of emergency department visits, and research shows participants have a reduced risk of food insecurity, housing instability and lack of access to transportation. Further, the findings showed that the longer a person was enrolled in the pilots the greater reduction of risk.

"The Healthy Opportunity Pilots are having a tremendous impact on the lives of thousands of people in North Carolina by removing barriers for people, particularly in rural areas, to services that are critical to whole-person health," said State Health Director and NCDHHS Chief Medical Officer Elizabeth Cuervo Tilson, M.D., M.P.H., in a statement. "This collaborative effort is also investing in the economy of our local communities, which also promotes health.”

NCDHHS used the example of one member to describe how the program works. A single mother had been staying at a local shelter with her children but needed life-saving surgery. Her children couldn’t remain in the shelter without her, which left her in an impossible position. Mom had secured an emergency housing voucher, but it wasn’t enough to cover rent in the county where she would be receiving treatment.

Through the Healthy Opportunities Pilots, her care managers were able to help her transfer her housing voucher and secure income-based housing near the hospital. They also helped her access financial support for her security deposit and utility setup fees — all services that are covered for the Healthy Opportunities Pilots participants.

Now, mom is able to focus on her health, schedule needed medical care, and keep her family together under one roof with help from her friends and the Healthy Opportunities Pilots.

Encouraged by early success of the program, NCDHHS renewed a federal 1115 waiver in October 2023, which included a request to allow expansion of Healthy Opportunities services statewide. NCDHHS anticipates working in collaboration with federal partners to expand the program and ensure more people in North Carolina receive these services.

Right now, the Healthy Opportunities Pilots services are available to qualifying NC Medicaid Managed Care Standard Plan beneficiaries who live in a Pilot region and meet at least one qualifying physical or behavioral health criteria and one qualifying social risk factor. The program looks forward to further extending access to these services later this year for Medicaid Direct beneficiaries who are eligible for tailored care management in the Pilot regions.

An Unsustainable Fiscal Path

An important purpose of the Financial Report is to help citizens understand current fiscal policy and the importance and magnitude of policy reforms necessary to make it sustainable. This Financial Report includes the SLTFP and a related note disclosure (Note 24). The Statements display the PV of 75-year projections of the federal government’s receipts and non-interest spending17 for FY 2023 and FY 2022.

Fiscal Sustainability

A sustainable fiscal policy is defined as one where the debt-to-GDP ratio is stable or declining over the long term. The projections based on the assumptions in this Financial Report indicate that current policy is not sustainable. This Financial Report presents data, including debt, as a percent of GDP to help readers assess whether current fiscal policy is sustainable. The debt-to-GDP ratio was approximately 97 percent at the end of FY 2023, which is similar to (but slightly above) the debt to-GDP ratio at the end of FY 2022. The long-term fiscal projections in this Financial Report are based on the same economic and demographic assumptions that underlie the 2023 SOSI, which is as of January 1, 2023. As discussed below, if current policy is left unchanged and based on this Financial Report’s assumptions, the debt-to-GDP ratio is projected to exceed 200 percent by 2047 and reach 531 percent in 2098. By comparison, under the 2022 projections, the debt-to-GDP ratio exceeded 200 percent one year earlier in 2046 and reached 566 percent in 2097. Preventing the debt-to-GDP ratio from rising over the next 75 years is estimated to require some combination of spending reductions and revenue increases that amount to 4.5 percent PV of GDP over the period. While this estimate of the “75-year fiscal gap” is highly uncertain, it is nevertheless nearly certain that current fiscal policies cannot be sustained indefinitely.

Delaying action to reduce the fiscal gap increases the magnitude of spending and/or revenue changes necessary to stabilize the debt-to-GDP ratio as shown in Table 6 below.

The estimates of the cost of policy delay assume policy does not affect GDP or other economic variables. Delaying fiscal adjustments for too long raises the risk that growing federal debt would increase interest rates, which would, in turn, reduce investment and ultimately economic growth.

The projections discussed here assume current policy18 remains unchanged, and hence, are neither forecasts nor predictions. Nevertheless, the projections demonstrate that policy changes must be enacted to move towards fiscal sustainability.

The Primary Deficit, Interest, and Debt

The primary deficit – the difference between non-interest spending and receipts – is the determinant of the debt-to-GDP ratio over which the government has the greatest control (the other determinants include interest rates and growth in GDP). Chart 8 shows receipts, non-interest spending, and the difference – the primary deficit – expressed as a share of GDP. The primary deficit-to-GDP ratio spiked during 2009 through 2012 due to the 2008-09 financial crisis and the ensuing severe recession, as well as the effects of the government’s response thereto. These elevated primary deficits resulted in a sharp increase in the ratio of debt to GDP, which rose from 39 percent at the end of 2008 to 70 percent at the end of 2012. As an economic recovery took hold, the primary deficit ratio fell, averaging 2.1 percent of GDP over 2013 through 2019. The primary deficit-to-GDP ratio again spiked in 2020, rising to 13.3 percent of GDP in 2020, due to increased spending to address the COVID-19 pandemic and lessen the economic impacts of stay-at-home and social distancing orders on individuals, hard-hit industries, and small businesses. Spending remained elevated in 2021 due to additional funding to support economic recovery, but increased receipts reduced the primary deficit-to-GDP ratio to 10.8 percent.

The primary deficit-to-GDP ratio in 2023 was 3.8 percent, increasing by 0.2 percentage points from 2022 primarily due to lower receipts, partially offset by lower non-interest spending. The primary deficit-to-GDP ratio is projected to fall to 3.2 percent in 2024, based on the technical assumptions in this Financial Report, and projected changes in receipts and outlays, including an estimated decrease in Medicaid outlays as the expiration of temporary measures related to the COVID-19 pandemic winds down. After 2024, increased spending for Social Security and health programs due to the continued retirement of the baby boom generation, is projected to result in increasing primary deficit ratios that peak at 4.4 percent of GDP in 2043. Primary deficits as a share of GDP gradually decrease beyond that point, as aging of the population continues at a slower pace and reach 2.8 percent of GDP in 2098, the last year of the projection period.

Trends in the primary deficit are heavily influenced by tax receipts. The receipt share of GDP was markedly depressed in 2009 through 2012 because of the recession and tax reductions enacted as part of the ARRA and the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The share subsequently increased to nearly 18.0 percent of GDP by 2015, before falling to 16.3 percent in 2018, after enactment of the TCJA.

 

Receipts reached 19.6 percent of GDP in 2022, the highest share of GDP since 2000, then fell to 16.5 percent of GDP in 2023 due to a decrease in individual income tax receipts and lower deposits of earnings by the Federal Reserve. Receipts are projected to gradually increase to 18.1 percent of GDP in 2033 when corporation income tax and other receipts stabilize as a share of GDP. After 2033, receipts grow slightly more rapidly than GDP over the projection period as increases in real (i.e., inflation-adjusted) incomes cause more taxpayers and a larger share of income to fall into the higher individual income tax brackets. 19

On the spending side, the non-interest spending share of GDP was 20.3 percent in 2023, 2.9 percentage points below the share of GDP in 2022, which was 23.2 percent. The ratio of non-interest spending to GDP is projected to fall to 20.1 percent in 2024 and then rise gradually, reaching 23.3 percent of GDP in 2076. The ratio of non-interest spending to GDP then declines to 22.7 percent in 2098, the end of the projection period. These increases are principally due to faster growth in Social Security, Medicare, and Medicaid spending (see Chart 8). The aging of the baby boom generation, among other factors, is projected to increase the spending shares of GDP of Social Security and Medicare by about 0.7 and 1.7 percentage points, respectively, from 2024 to 2040. After 2040, the Social Security and Medicare spending shares of GDP continue to increase in most years, albeit at a slower rate, due to projected increases in health care costs and population aging, before declining toward the end of the projection period.

On a PV basis, deficit projections reported in the FY 2023 Financial Report decreased in both present-value terms and as a percent of the current 75-year PV of GDP. As shown in the SLTFP, this year’s estimate of the 75-year PV imbalance of receipts less non-interest spending is 3.8 percent of the current 75-year PV of GDP ($73.2 trillion), compared to 4.2 percent ($79.5 trillion) as was projected in last year’s Financial Report. As discussed in Note 24, these decreases are attributable to the net effect of the following factors:

• Changes due to program-specific actuarial assumptions is the effect of new Social Security, Medicare, and Medicaid program-specific actuarial assumptions, which decrease the fiscal imbalance as a share of the 75-year PV of GDP by 0.6 percentage points ($10.6 trillion). This change is primarily attributable to near-term growth rate assumptions for Medicaid. In the 2022 projections, growth rates through 2027 followed projections in the 2018 Medicaid Actuarial Report. Growth rates for the 2023 projections are based on NHE data and reflect the expiration of temporary measures related to the COVID-19 pandemic.
• Changes due to updated budget data increased the fiscal imbalance by 0.4 percentage points ($7.4 trillion). This change stems from actual budget results for FY 2023 and baseline estimates published in the FY 2024 President’s Budget, plus adjustments to discretionary spending and receipts from legislation enacted in the FRA (P.L. 118-5).20 This deterioration in the fiscal position is largely due to a higher 75-year PV of discretionary spending on defense programs and mandatory spending on programs other than Social Security, Medicare, and Medicaid, and lower individual income taxes as a share of wages and salaries. That deterioration is partially offset by a lower 75-year PV of spending on non-defense discretionary programs—attributable to the FRA caps—and higher other receipts.
• Changes due to economic and demographic assumptions decreased the fiscal imbalance by 0.3 percentage points ($5.0 trillion). Contributing to this improvement in the imbalance are higher wages that increase receipts and GDP growth rates that lead to reduced spending as a percentage of GDP. The 75-year PV of GDP for this year’s projections is $1,919.1 trillion, greater than last year’s $1,872.9 trillion.
• Change in reporting period is the effect of shifting calculations from 2023 through 2097 to 2024 through 2098 and increased the imbalance of the 75-year PV of receipts less non-interest spending by $1.9 trillion, which has a negligible effect on the 75-year PV of GDP.

The net effect of the changes in the table above, equal to the penultimate row in the SLTFP, shows that this year’s estimate of the overall 75-year PV of receipts less non-interest spending is negative 3.8 percent of the 75-year PV of GDP (negative $73.2 trillion, as compared to a GDP of $1,919.1 trillion).

One of the most important assumptions underlying the projections is that current federal policy does not change. The projections are therefore neither forecasts nor predictions, and do not consider large infrequent events such as natural disasters, military engagements, or economic crises. By definition, they do not build in future changes to policy. If policy changes are enacted, perhaps in response to projections like those presented here, then actual fiscal outcomes will be different than those projected.

Another important assumption is the future growth of health care costs. As discussed in Note 25, these future growth rates – both for health care costs in the economy generally and for federal health care programs such as Medicare, Medicaid, and PPACA exchange subsidies – are highly uncertain. In particular, enactment of the PPACA in 2010 and the MACRA in 2015 lowered payment rate updates for Medicare hospital and physician payments whose long-term effectiveness of which is not yet clear. The Medicare spending projections in the long-term fiscal projections are based on the projections in the 2023 Medicare Trustees Report, which assume the PPACA and MACRA cost control measures will be effective in producing a substantial slowdown in Medicare cost growth.

As discussed in Note 25, the Medicare projections are subject to much uncertainty about the ultimate effects of these provisions to reduce health care cost growth. Certain features of current law may result in some challenges for the Medicare program including physician payments, payment rate updates for most non-physician categories, and productivity adjustments. Payment rate updates for most non-physician categories of Medicare providers are reduced by the growth in economy-wide private nonfarm business total factor productivity although these health providers have historically achieved lower levels of productivity growth. Should payment rates prove to be inadequate for any service, beneficiaries’ access to and the quality of Medicare benefits would deteriorate over time, or future legislation would need to be enacted that would likely increase program costs beyond those projected under current law. For the long-term fiscal projections, that uncertainty also affects the projections for Medicaid and exchange subsidies, because the cost per beneficiary in these programs is assumed to grow at the same reduced rate as Medicare cost growth per beneficiary. Other key assumptions, as discussed in greater detail in Note 24—Long-Term Fiscal Projections, include the following:

• Medicaid spending projections start with the NHE projections which are based on recent trends in Medicaid spending, as well as Trustees Report assumptions. NHE projections, which end in 2031, are adjusted to accord with the actual Medicaid spending in FY 2023. After 2031, the number of beneficiaries is projected to grow at the same rate as total population. Medicaid cost per beneficiary is assumed to grow at the same rate as Medicare benefits per beneficiary after 2034, after a three-year phase-in to the Medicare per beneficiary growth rate over the period 2032-2034. The most recent Social Security and Medicare Trustees Reports were released in March 2023.
• Other mandatory spending includes federal employee retirement, veterans’ disability benefits, and means-tested entitlements other than Medicaid. Current mandatory spending components that are judged permanent under current policy are assumed to increase by the rate of growth in nominal GDP starting in 2024, implying that such spending will remain constant as a percent of GDP.
• Defense and non-defense discretionary spending follows the FRA caps through 2025, then grows with GDP starting in 2026.
• Debt and interest spending is determined by projected interest rates and the level of outstanding debt held by the public. The long-run interest rate assumptions accord with those in the 2023 Social Security Trustees Report. The average interest rate over this year’s projection period is 4.5 percent, approximately the same as the 2022 Financial Report. Debt at the end of each year is projected by adding that year’s deficit and other financing requirements to the debt at the end of the previous year.
• Receipts (other than Social Security and Medicare payroll taxes) is comprised of individual income taxes, corporate income taxes and other receipts.
• • Individual income taxes were based on the share of individual income taxes of salaries and wages in the current law baseline projection in the FY 2024 President’s Budget, and the salaries and wages projections from the Social Security 2023 Trustees Report. That baseline accords with the tendency of effective tax rates to increase as growth in income per capita outpaces inflation (also known as “bracket creep”) and the expiration dates of individual income and estate and gift tax provisions of the TCJA. Individual income taxes are projected to increase gradually from 19 percent of wages and salaries in 2024, to 29 percent of wages and salaries in 2098 as real taxable incomes rise over time and an increasing share of total income is taxed in the higher tax brackets.
  • Corporation tax receipts as a percent of GDP reflect the economic and budget assumptions used in developing the FY 2024 President’s Budget ten-year baseline budgetary estimates through the first ten projection years, after which they are projected to grow at the same rate as nominal GDP. Corporation tax receipts fall from 1.7 percent of GDP in 2024 to 1.2 percent of GDP in 2033, where they stay for the remainder of the projection period.
  • Other receipts, including excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts, also reflect the FY 2024 President’s Budget baseline levels as a share of GDP throughout the budget window, and grow with GDP outside of the budget window. The ratio of other receipts, to GDP is estimated to increase from 1.1 percent in 2024 to 1.2 percent by 2027 where it remains through the projection period.
• Projections for the other categories of receipts and spending are consistent with the economic and demographic assumptions in the Trustees Reports and include updates for actual budget results for FY 2023 or budgetary estimates from the FY 2024 President’s Budget.

The primary deficit-to-GDP projections in Chart 8, projections for interest rates, and projections for GDP together determine the debt-to-GDP ratio projections shown in Chart 9.That ratio was approximately 97 percent at the end of FY 2023 and under current policy is projected to exceed the historic high of 106 percent in 2028, rise to 200 percent by 2047 and reach 531 percent by 2098. The change in debt held by the public from one year to the next generally represents the budget deficit, the difference between total spending and total receipts. The debt-to-GDP ratio rises continually in great part because primary deficits lead to higher levels of debt, which lead to higher net interest expenditures, and higher net interest expenditures lead to higher debt.21 The continuous rise of the debt-to-GDP ratio indicates that current policy is unsustainable.

These debt-to-GDP projections are lower than the corresponding projections in both the 2022 and 2021 Financial Reports. For example, the last year of the 75-year projection period used in the FY 2021 Financial Report is 2096. In the FY 2023 Financial Report, the debt-to-GDP ratio for 2096 is projected to be 518 percent, which compares with 559 and 701 percent for the 2096 projection year in the FY 2022 Financial Report and the FY 2021 Financial Report, respectively.22

  

The Fiscal Gap and the Cost of Delaying Policy Reform

The 75-year fiscal gap is one measure of the degree to which current policy is unsustainable. It is the amount by which primary surpluses over the next 75 years must, on average, rise above current-policy levels in order for the debt-to-GDP ratio in 2098 to remain at its level in 2023. The projections show that projected primary deficits average 3.8 percent of GDP over the next 75 years under current policy. If policies were adopted to eliminate the fiscal gap, the average primary surplus over the next 75 years would be 0.6 percent of GDP, 4.5 percentage points higher than the projected PV of receipts less non-interest spending shown in the financial statements. Hence, the 75-year fiscal gap is estimated to equal to 4.5 percent of GDP. This amount is, in turn, equivalent to 23.8 percent of 75-year PV receipts and 19.8 percent of 75-year PV non-interest spending. This estimate of the fiscal gap is 0.4 percentage points smaller than was estimated in the FY 2022 Financial Report (4.9 percent of GDP).

In these projections, closing the fiscal gap requires running substantially positive primary surpluses, rather than simply eliminating the primary deficit. The primary reason is that the projections assume future interest rates will exceed the growth rate of GDP. Achieving primary balance (that is, running a primary surplus of zero) implies that the debt grows each year by the amount of interest spending, which under these assumptions would result in debt growing faster than GDP.

Topline: It will take an extra $175.3 trillion to keep Medicare and Social Security intact for when today’s children reach old age, according to OpenTheBooks’ analysis of the nation’s latest financial report.

Key facts: The Treasury Department projected spending over the “infinite horizon,” or the lifetime of everyone in the country today.

It projects that current participants in Medicare and Social Security will collect $105.4 trillion more in benefits from the programs than they contribute into them through payroll taxes.

Future participants, who are younger than 15 and even in the womb, will use up $69.9 trillion more than they pay in taxes.

Combined, that’s an unfathomable $175.3 trillion gap that can only be closed with “increased borrowing, higher taxes, reduced program spending or some combination,” according to the Treasury.

There’s no easy way to put that number in context. The national debt is “only” $34 trillion. The federal government has spent roughly $200 trillion on everything since the Constitution was written in 1787, even adjusted for inflation.

Medicare Part B, which covers doctor’s visits and medical equipment, is the largest liability. It’s expected to be underfunded by $99.5 trillion.

Social Security needs an extra $68.8 trillion to be solvent.

Background: Medicare and Social Security are supposed to fully fund themselves through payroll taxes, health care premiums and benefit taxes, a process that worked well until the 1980s.

Former President Ronald Reagan, among others, warned of the looming funding crisis and encouraged Congress to pass the Social Security Reform Act of 1983.

But since then, the system has remained largely untouched.

Medicare spending was equal to 2.9% of the U.S. GDP in 2022, but the Congressional Budget Office expects it to reach 5.9% of GDP by 2052. Social Security spending is projected to rise from 4.9% to 6.4%.

Medicare is expected to start cutting benefits in seven years, but the long-term implications are much more serious. The Treasury is required by U.S. law to borrow money if there is not enough to pay for Medicare and Social Security, which may soon be impossible without multiplying the federal debt.

Summary: There’s no realistic path toward generating the amount of money needed to avoid slashing Medicare and Social Security payments. Politicians have deferred having this difficult conversation for decades, but soon that will no longer be an option.

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Today, the U.S. Department of Health and Human Services (HHS) issued four new reports showing that President Biden’s efforts to strengthen the Affordable Care Act (ACA) are linked to historic gains in Americans’ health insurance coverage. Today’s announcements include a report from the Centers for Medicare & Medicaid Services (CMS) showing that over 21 million consumers selected or were automatically re-enrolled in health insurance coverage through HealthCare.gov and State-based Marketplaces during 2024’s Open Enrollment Period (OEP). Three reports from HHS’s Office of the Assistant Secretary for Planning and Evaluation (ASPE) highlight current enrollment trends, enrollment trends broken down by race and ethnicity, and how the ACA Marketplaces have evolved and strengthened during the first ten years. ASPE analysis shows that today over 45 million people have coverage thanks to the Affordable Care Act’s Marketplaces and Medicaid expansion.

“On the ten-year anniversary of the ACA Marketplaces, HHS is releasing data that shows just how profoundly it has reshaped what health care looks like for so many Americans. The Marketplaces have become a pillar of American society, a guaranteed place where people can find affordable, quality coverage,” said HHS Secretary Xavier Becerra. “Thanks to President Biden’s leadership, more than 21 million Americans have health insurance through the Affordable Care Act Marketplaces, an all-time high, with millions of families saving hundreds of dollars every month. At HHS, we will keep doing everything we can to ensure more people have access to affordable, high-quality health care and the peace of mind that comes with it.”

“As we look back and celebrate the historic achievements of the Affordable Care Act, the law continues to live up to its purpose of providing affordable, quality health care coverage to Americans. Gone are the days when being a woman was considered a pre-existing condition or sick children could be denied health insurance. Today, over 100 million Americans have coverage through either Marketplace or Medicaid, thanks (in part) to increased affordability thanks to the Inflation Reduction Act,” said Centers for Medicare & Medicaid Services Administrator Chiquita Brooks-LaSure. “And we’re not stopping. Our commitment to strengthening the ACA and increasing access to affordable, comprehensive health care coverage has never been stronger.”

The Biden-Harris Administration has taken unprecedented action to make health insurance available and affordable to everyone. National estimates show that most consumers qualified for $0 premiums or are saving at least $800 a year on their premium, underscoring the importance of the American Rescue Plan and Inflation Reduction Act. Overall, four in five HealthCare.gov customers were able to select from health care coverage options that were $10 or less per month.  Additionally, the Biden-Harris Administration issued almost $100 million for organizations to hire staff to help consumers find affordable, comprehensive health coverage. Navigators, as they are known, have been key to helping consumers in every state. 

Key points from today’s reports include the following.

2024: Total Marketplace Plan Selections During 2024 Open Enrollment Period - PDF

• During the 2024 Open Enrollment Period (OEP), over 21.4 million consumers selected or were automatically re-enrolled in health insurance coverage through HealthCare.gov Marketplaces and State-Based Marketplaces (SBMs).
• 5.1 million more consumers signed up for coverage during the 2024 OEP compared to the 2023 OEP, a 31% increase.
• In HealthCare.gov Marketplaces, 16.4 million consumers selected plans during the 2024 OEP between November 1, 2023 and January 16, 2024.
• Across the 19 SBMs, 5.1 million consumers selected plans during the 2024 OEP from November 1, 2023 through the end of their respective OEPs.
• 5.2 million people who signed up for coverage did so for the first time, a 41% increase from 3.7 million during the previous OEP.
• Nationwide, 44% of consumers selected a plan for $10 or less per month after APTC during the 2024 OEP.

2024: Coverage Under the Affordable Care Act:  Current Enrollment Trends and State Estimates

• 18.6 million people have coverage thanks to the ACA’s Medicaid expansion.
• Across coverage groups, a total of 45 million Americans are enrolled in coverage related to the ACA, the highest total on record.  This represents 14.1 million more people enrolled than in 2021 (a 46% increase) and 32.5 million more people enrolled than in 2014 (a 258% increase, or more than triple). 
• Survey results indicate that all 50 states and the District of Columbia have experienced substantial reductions in their uninsured rates since 2013, the last year before implementation of the ACA.

2015-2023: ASPE Marketplace Enrollment by Race and Ethnicity Issue Brief

• Biden-Harris Administration policies – such as expanded and enhanced premium tax credits under the American Rescue Plan and the Inflation Reduction Act and increased Marketplace outreach and Navigator funding – likely contributed to gains in health coverage, particularly among low-income populations and communities of color.
• Black Americans and Latinos continued to enroll in health coverage through the Marketplace at high rates. An estimated 1.7 million Black people and 3.4 million Latino people enrolled in Marketplace plans in HealthCare.gov states during the 2023 Open Enrollment Period, representing enrollment increases of 95% and 103% respectively since 2020.
• The number of Asian-American, Native Hawaiian, and Pacific Islander (AANHPI) enrollees increased by 14 percent between 2020 and 2023.
• Over half of Black, Latino, and Asian American enrollees select silver plans with cost sharing reductions, making it the most frequently selected plan. These plans with cost sharing reductions allow patients below a certain income to pay less out of pocket each time they receive medical services. 

2014-2024: How the ACA Marketplaces have evolved in 10 years

• The ACA substantially transformed health insurance by creating Health Insurance Marketplaces where consumers can shop for private comprehensive coverage that meets consumer protection and coverage standards
• The number of issuers participating in Marketplaces has grown in recent years providing nearly all Marketplace consumers (96 percent) with a choice of plan offerings of at least three different issuers.  This increase in market competition has contributed to premiums that are more affordable for both enrollees and taxpayers.  In 2024, 210 health insurance issuers are participating in Marketplaces.
• Between 2013 and the third quarter of 2023, the uninsured rate for all ages fell from 14.4 percent to 7.7 percent.  Since 2013, the uninsured rate for children has decreased from 6.5 percent to 3.4 percent in 2023.
• The ACA brought key consumer protections, such as preventing consumers from getting denied or charged more for coverage due to pre-existing conditions, age, and gender.
  • For example, prior to the ACA, 92 percent of popular plans used gender rating.  A woman could pay as much as 81 percent more for the same plan as a man of the same age, even without the plan covering maternity care
• Prior to the ACA, health plans also often limited the benefits they covered. In 2011, 62 percent of individual market enrollees did not have coverage for maternity services, 34 percent did not have coverage for substance use disorder services, 18 percent did not have coverage for mental health services, and nine percent of enrollees did not have coverage for prescription drugs.

The Affordable Care Act (ACA), better known as Obamacare, turns 14 this Saturday. Its proponents claimed the ACA would lower costs and make health care more affordable. But after 14 years the data tell a different story.

Former President Barack Obama signed the ACA into law on March 23rd, 2010. His administration wanted to make health care “a right for every American”, and in typical government fashion that meant spending a lot of taxpayer money. The ACA’s subsidies have obscured the program’s true costs, and its impact on insurance coverage has fallen short of projections.

A study from Paragon Health Institute shows that while 19 million additional people got health insurance coverage after the ACA went into effect, only about 2 million got private insurance. The remaining 17 million were covered under the act’s Medicaid expansion provisions. The Congressional Budget Office (CBO) initially projected that the ACA would increase coverage by 25 million people, evenly split between private coverage and Medicaid expansion. However, as shown in the figure below, the percentage of people with private insurance coverage (blue line) has been flat.

One way to get private insurance is to buy a plan from an ACA exchange. The exchanges are websites operated by some states or the federal government where people can purchase ACA-compliant insurance plans. Competition was supposed to keep prices in check, but premiums continue to increase. The CBO estimated that exchange enrollees would cost federal taxpayers $6,850 each by 2021. In reality, each new enrollee cost taxpayers $20,739, or over three times as much. Given this high cost, perhaps taxpayers should be thankful enrollment has fallen short of expectations.

The ACA has cost taxpayers in other ways. It significantly expanded Medicaid, which provides health insurance to lower-income Americans, children, and disabled adults. Under the ACA, Medicaid eligibility was expanded to non-disabled, working-age adults earning up to 138% of the federal poverty line. To entice states to expand Medicaid, the ACA also increased the federal match given to states to offset the program’s cost, known as the federal medical assistance percentage (FMAP). The FMAP is typically based on a state’s per capita income, with wealthier states getting a smaller percentage than poorer states.

For people newly eligible under the Medicaid expansion the FMAP increased to 100% from 2014 to 2016 for all states, regardless of per capita income. After that, it declined until it hit 90% in 2020 for all states, where it remains. Forty states plus Washington, D.C., have expanded their Medicaid programs to take advantage of the federal subsidy.

Florida is one of the ten holdouts, and for good reason. In a recent study, Brian Blase and Drew Gonshorowski note that Medicaid is now the largest program in state budgets, exceeding spending on K-12 education. In 2022, Florida spent $38.3 billion on Medicaid but only $25 billion on education. Even without expansion, Medicaid spending drives most of the growth in government spending in Florida, as shown in the figure below. Expanding Medicaid would accelerate this trend.

March 25, 2024 - The Families First Coronavirus Response Act required Medicaid to provide continuous coverage for beneficiaries throughout the COVID-19 pandemic. With disenrollments paused, Medicaid and the Children’s Health Insurance Program (CHIP) enrollment grew by over 23 million beneficiaries.

The continuous coverage policy ended with the public health emergency, and states could begin coverage redeterminations on April 1, 2023. HHS had projected that 15 million beneficiaries would lose Medicaid coverage. However, as of March 20, 2024, more than 18 million people have been disenrolled. What’s more, 35 million beneficiaries’ eligibility redeterminations have either still not been completed or have not been reported.

Disenrollment numbers and processes have varied across states. Starting from April 2023, states have up to twelve months to initiate redeterminations. Some states began disenrollments in April, while others waited until May, June, or July. Oregon did not resume coverage determinations until October.

“Medicaid unwinding has been a massive undertaking for states,” Louise Norris, a health policy analyst for healthinsurance.org, said. “Not only do states have to redetermine eligibility for the record-high number of people enrolled in Medicaid, but they also have to continue to process new applications.”

Texas has disenrolled the most Medicaid beneficiaries so far at 2 million, while Wyoming has disenrolled the fewest number at 5,300 beneficiaries, according to KFF data. Utah has disenrolled the highest percentage of its completed Medicaid redeterminations (57 percent), and Maine has disenrolled the lowest percentage (12 percent).

Since the Medicaid unwinding started, coverage has been renewed for 40 million beneficiaries. Most renewals did not require beneficiaries to provide any information to confirm their eligibility, but 40 percent of cases required individuals to complete a renewal packet for confirmation.

The majority of disenrollments were due to procedural reasons, meaning beneficiaries did not complete the required renewal process to maintain coverage. These beneficiaries may have misunderstood the process, not had the resources to complete it, or may not even know they had to complete anything.

Many people who lost Medicaid eligibility are now eligible for an employer-sponsored health plan. Individuals have also transitioned to marketplace coverage. Through November 2023, nearly 2.3 million people moved from Medicaid to a marketplace plan, while 229,000 had transitioned to Basic Health Program coverage.

Disenrolled beneficiaries moving to a marketplace plan can enroll before July 31, 2024, as part of an extended unwinding special enrollment period. These individuals may qualify for premium subsidies to offset costs.

Federal lawmakers are taking another stab at increasing funding for behavioral health expenditures in the Medicaid program.

A version of the Medicaid Bump Act was introduced in the U.S. Senate and Congress on March 12. The bill would create financial incentives for states to elevate spending on behavioral health beyond levels in 2019. Specifically, it would create an enhanced Federal Medical Assistance Percentage (FMAP) rate of 90% for mental health and substance use disorder (SUD) treatment.

States and their Medicaid programs would not be allowed to use the additional federal money to replace state funding levels. The new funds would be used to increase the capacity, efficiency and quality of behavioral health within Medicaid provider networks, according to a news release.

“Unfortunately, systemic underinvestment has left far too many out in the cold and without a place to seek these vital resources,” Rep. Paul Tonko (D-N.Y.) said in a news release. “Our Medicaid Bump Act begins to right that wrong, bolstering availability for providers by increasing the federal reimbursement rate for mental and behavioral health care services under Medicaid.”

About 40% of those on Medicaid have behavioral health conditions.

Sen. Tina Smith (D-Minn.) and Sen. Debbie Stabenow (D-Mich.) are the sponsors of the bill’s Senate version. Tonko filed an equivalent bill in the House in July 2023. He is joined by co-sponsors Rep. Brian Fitzpatrick (R-Penn.) and Rep. David Trone (D-Md.).

“As Co-Chair of the Bipartisan Mental Health and Substance Use Disorder Task Force, I’m proud to co-lead this bipartisan, bicameral legislation that will provide an incentive for states to increase their Medicaid spending on behavioral health services in order to expand access to care in areas where the demand outstrips the supply of service providers,” Fitzpatrick said in the release.

The bill would charge the Secretary of Health and Human Services (HHS) to define which services qualify as eligible behavioral health services for the enhanced FMAP. It would also enact an annual reporting requirement detailing the impact of the funding increase on behavioral health utilization.

Legislation that would have had a similar effect and used the same name first popped up in Congress in 2017, according to a cursory review of the legislative body’s website. At that time, then-Rep. Joe Kennedy III sponsored the bill. He filed it again in 2019. Tonko and Smith took up the legislation in 2021. Tonko refiled in 2023. 

Medicaid has seen greater reform attention during the Biden administration. A recent funding bill made certified community behavioral health centers (CCBHCs) permanent by amending the Social Security Act. In February, The Centers for Medicare and Medicaid (CMS) released new guidance to state Medicaid directors on allowing master’s-level social workers, marriage and family therapists, and other master’s level behavioral health clinicians greater participation in Medicaid.

However, other analyses highlight gaps in the system. A review of the Medicaid program found that about 75% of states are missing “core” behavioral health crisis response services.