The Post-SGR Budget Outlook
Lawmakers cleared their second Fiscal Speed Bump of the year - the expiration of the one-year "doc fix" - earlier this month, scuttling the Medicare Sustainable Growth Rate (SGR) formula for good by adding $141 billion to deficits through 2025 ($175 billion with interest). As a result, CBO's last baseline in March is now slightly out of date, and the agency usually doesn't release new ten-year numbers until August, so here's our estimate of what the baseline looks like in the post-SGR world.
The new law increases debt by about one percentage point of Gross Domestic Product (GDP) by 2025, from 77 percent to 78 percent. It also increases ten-year deficits and health care spending by about one-tenth of a percent of GDP while slightly increasing interest spending from 2.9 to 3 percent of GDP in 2025. Not surprisingly, the law slightly increases the share of spending going to health care and interest.
The New Ten-Year Budget Outlook (Percent of GDP) | ||||||||||||
2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 | 2025 | 2016-2025 | |
Revenue | 17.7% | 18.4% | 18.3% | 18.1% | 18.1% | 18.1% | 18.1% | 18.1% | 18.2% | 18.2% | 18.3% | 18.2% |
Health Care* | 5.2% | 5.4% | 5.3% | 5.2% | 5.5% | 5.5% | 5.6% | 5.9% | 5.9% | 5.8% | 6.1% | 5.7% |
Medicare | 3.0% | 3.0% | 2.9% | 2.8% | 3.0% | 3.1% | 3.2% | 3.5% | 3.4% | 3.3% | 3.6% | 3.2% |
Medicaid/CHIP | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.0% | 2.1% | 2.1% | 2.1% | 2.1% | 2.1% |
Exchange | 0.2% | 0.3% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% | 0.4% |
Social Security | 4.9% | 4.9% | 4.9% | 5.0% | 5.1% | 5.2% | 5.3% | 5.4% | 5.5% | 5.6% | 5.7% | 5.3% |
Other Mandatory | 2.6% | 2.9% | 2.8% | 2.6% | 2.5% | 2.5% | 2.4% | 2.5% | 2.3% | 2.2% | 2.3% | 2.5% |
Discretionary | 6.5% | 6.3% | 6.0% | 5.8% | 5.7% | 5.6% | 5.5% | 5.4% | 5.3% | 5.2% | 5.1% | 5.5% |
Interest | 1.3% | 1.5% | 1.7% | 2.0% | 2.2% | 2.4% | 2.6% | 2.7% | 2.8% | 2.9% | 3.0% | 2.4% |
Total Spending | 20.5% | 20.9% | 20.7% | 20.6% | 21.0% | 21.2% | 21.4% | 21.9% | 21.8% | 21.7% | 22.2% | 21.4% |
Deficit | -2.7% | -2.5% | -2.4% | -2.5% | -2.9% | -3.2% | -3.3% | -3.8% | -3.7% | -3.5% | -3.8% | -3.2% |
Debt | 74.2% | 73.9% | 73.5% | 73.2% | 73.5% | 73.9% | 74.5% | 75.4% | 76.2% | 76.8% | 77.8% | N/A |
Source: CRFB calculations based on CBO data
*Includes net Medicare, Medicaid/CHIP, and health insurance exchange subsidies
We also can produce long-term budget projections building off this ten-year outlook with extrapolations based on the Congressional Budget Office's (CBO) long-term outlook. Just as their outlook showed last June, we find a clear upward path for debt over the long term, with it exceeding the size of the economy by the late-2030s and reaching over 200 percent by around 2080.
![](https://crfb.org/sites/default/files/new_lto_2.jpg)
Overall, spending rises significantly and becomes more heavily concentrated in Social Security and especially health care and interest spending, while revenue rises much more slowly.
The New Long-Term Budget Outlook (Percent of GDP) | ||||||||
2015 | 2025 | 2035 | 2045 | 2055 | 2065 | 2075 | 2085 | |
Revenue | 17.7% | 18.3% | 19.0% | 19.9% | 20.8% | 21.7% | 22.6% | 23.5% |
Health Care* | 5.2% | 6.1% | 7.5% | 8.7% | 9.8% | 11.0% | 12.2% | 13.4% |
Social Security | 4.9% | 5.7% | 6.4% | 6.2% | 6.3% | 6.5% | 6.7% | 6.8% |
Other Mandatory | 2.6% | 2.3% | 1.9% | 1.6% | 1.4% | 1.1% | 1.0% | 0.8% |
Discretionary | 6.5% | 5.1% | 5.1% | 5.1% | 5.1% | 5.1% | 5.1% | 5.1% |
Interest | 1.3% | 3.0% | 4.2% | 5.2% | 6.1% | 7.2% | 8.5% | 9.9% |
Total Spending | 20.5% | 22.2% | 25.1% | 26.8% | 28.7% | 31.0% | 33.5% | 36.0% |
Deficit | -2.7% | -3.8% | -6.1% | -6.9% | -7.9% | -9.3% | -10.9% | -12.5% |
Debt | 74% | 78% | 95% | 117% | 139% | 163% | 191% | 223% |
Source: CRFB calculations based on CBO data
*Includes net Medicare, Medicaid/CHIP, and health insurance exchange subsidies
The budget outlook was already clearly unsustainable, and the SGR replacement law has made the situation worse by increasing spending in the fastest growing non-interest area of the budget. We will see in the coming months how much CBO has changed its budget outlook; for now, we estimate that it is certainly not getting any better.