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CONGRESSIONAL BUDGET OFFICE
Douglas W. Elmendorf, Director U.S. Congress Washington, DC 20515 www.cbo.gov 
April 5, 2011Honorable Paul RyanChairmanCommittee on the BudgetU.S. House of RepresentativesWashington, DC 20515Dear Mr. Chairman:In response to your request, the Congressional Budget Office (CBO) has conducted along-term analysis of your proposal to substantially change federal payments underthe Medicare and Medicaid programs, eliminate the subsidies to be provided throughnew insurance exchanges under last year’s major health care legislation, leave SocialSecurity as it would be under current law, and set paths for all other federal spending(excluding interest) and federal tax revenues at specified growth rates or percentages of gross domestic product (GDP). The results of that analysis are summarized in theattachment.CBO has not reviewed legislative language for your proposal, so this analysis does notrepresent a cost estimate for legislation that might implement the proposal. Rather, itis an assessment of the broad, long-term budgetary impacts of the proposal, withresults spanning several decades and measured as a share of GDP. It is therefore quitedifferent from a cost estimate for legislation, which would require much more detailedanalysis, focus on the first 10 years, and be based on more recent baseline projections.(CBO’s most recent long-term projections, which are the basis for this analysis, wereissued in June 2010 and were derived from the agency’s March 2010 baseline projec-tions.)I hope this information is helpful to you. If you have any questions, please contact meor CBO staff. The primary staff contact for this analysis is Joyce Manchester.Sincerely,Douglas W. Elmendorf Attachmentcc: Honorable Chris Van HollenRanking Member
 
CONGRESSIONAL BUDGET OFFICE
Long-Term Analysis of a Budget Proposal by Chairman Ryan
April 5, 2011Over the next several decades, the continued aging of the population and the growthof health care costs will, under current law, almost certainly boost federal spendingsignificantly relative to the output of the economy. According to the CongressionalBudget Office’s (CBO’s) most recent long-term projections, which were issued in June2010 and were based on the assumption that then-current law would generally remainin place, spending on Social Security and the government’s major mandatory healthcare programs—Medicare, Medicaid, the Children’s Health Insurance Program(CHIP), and health insurance subsidies to be provided through insuranceexchanges—will increase from roughly 10 percent of gross domestic product (GDP)today to about 15 percent 20 years from now.
1
If revenues and federal spending apartfrom those programs remain near their past levels relative to GDP, the increase inspending on Social Security and the health care programs will lead to rapidly growingbudget deficits and mounting federal debt.At the request of the Chairman of the House Budget Committee, Congressman PaulRyan, CBO has analyzed a proposal that would substantially change federal paymentsunder the Medicare and Medicaid programs, eliminate the subsidies to be providedthrough new insurance exchanges under last year’s major health care legislation, leaveSocial Security as it would be under current law, and set paths for all other federalspending (excluding interest) and federal tax revenues based on specified growth ratesor specified percentages of GDP. CBO has conducted a long-term analysis of themajor provisions of the proposal as described by the Chairman’s staff. The specifica-tions may differ in some ways from the plan released today by Chairman Ryan in
The Path to Prosperity: Restoring America’s Promise 
.CBO has not reviewed legislative language for the proposal, so this analysis does notrepresent a cost estimate for legislation that might implement the proposal. Rather, itis an assessment of the broad, long-term budgetary impacts of the proposal, withresults spanning several decades and measured as a share of GDP. It is therefore quite
1. See Congressional Budget Office,
The Long-Term Budget Outlook 
(June 2010, revised August2010). For the purpose of that analysis, CBO assumed that scheduled benefits for Social Security and Part A of Medicare would continue to be paid even if the trust funds for those programsbecame exhausted. Mandatory spending is generally controlled through authorizing legislation by setting eligibility rules, benefit formulas, and other parameters. Discretionary spending is con-trolled through the annual appropriation process.
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