US taxpayers will fork over $660 billion this year to subsidize health insurance for people under 65, the vast majority of whom have coverage through their employers, the Congressional Budget Office said on Thursday. In its most comprehensive report on the cost of subsidized health coverage, a potential target for deficit reduction, CBO said the 2016 tax bill equals 3.6 percent of gross domestic product and includes the federal tax exclusion for employer-sponsored insurance, Medicaid programs for the poor and tax credits available to lower-income Americans through the healthcare law known as Obamacare.
CBO said the cost of healthcare subsidies is expected to grow an annual 5.4 percent on average over the next decade, reaching $1.1 trillion, or 4.1 percent of GDP, in 2026, CBO researchers said in a report. The report did not include the federal cost of health insurance for people 65 and older. Federal healthcare spending, especially for Medicaid and the Medicare program for the elderly and disabled, plays a perennial role in congressional debate about reducing the deficit. Some lawmakers and policymakers have also suggested taxing employer health plans that are currently excluded from federal taxation. CBO estimated that $268 billion, or about 40 percent of this year's subsidies for health coverage, reflects tax breaks for small employers and the exclusion for employer-based health insurance plans that cover 155 million workers under 65 years of age.