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People under 65 to get $660 billion in health insurance subsidies

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(Reuters) — U.S. 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% 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 Patient Protection and Affordable Care Act.

CBO said the cost of health care subsidies is expected to grow an annual 5.4% on average over the next decade, reaching $1.1 trillion, or 4.1% 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 health care 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% 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.

Another $279 billion in subsidies are expected this year for Medicaid and the federal Children's Health Insurance Program, which provide coverage for about 68 million low-income Americans.

President Barack Obama's Affordable Care Act is expected to account for $110 billion in subsidies while providing health coverage for 23 million people.

CBO said ACA's insurance coverage provisions through 2019 will cost a net $157 billion, or 25% percent, less than originally estimated in 2010, just before the law was enacted.

However, unexpectedly high enrollment among people made eligible for Medicaid by the ACA is expected to push the cost of ACA insurance coverage provisions up $136 billion over the next decade, according to the report.