CBO: Healthcare Spending to Dominate Federal Budget

The Congressional Budget Office released a new report yesterday on the long-term outlook of the U.S. budget, and healthcare spending is expected to eat up increasingly larger portions of the budget and, consequently, contribute more to the national deficit.

CBO analysts said Medicare, Medicaid and Social Security are expected to grow from 10 percent of gross domestic product today to almost 16 percent of GDP in 25 years — or a total of $850 billion. "The aging of the baby-boom generation portends a significant and sustained increase in the share of the population receiving benefits from Social Security, Medicare, and as well as long-term care services financed by Medicaid," according to the report.

Two main scenarios explained the possibility of policy choices for the federal government. In the extended baseline scenario, federal debt would decline from 73 percent of GDP this year to 61 percent by 2022 if current law goes unchanged — for example, allowing the Bush-era tax cuts to expire and cutting physician Medicare payments by roughly 31 percent. However, many within the government and healthcare industry do not expect those to pass.


In the extended alternative fiscal scenario, the budget outlook is "much bleaker." Federal debt would exceed 90 percent of GDP by 2022, and federal outlays would be much higher. For example, assuming the sustainable growth rate for physician Medicare rates is temporarily fixed again, billions of dollars would be added to the deficit. This scenario also assumes "lawmakers will not allow various restraints on the growth of Medicare costs and health insurance subsidies to exert their full effect."

CBO analysts said ultimately, legislators will have to enact some type of combination of increased taxes and spending cuts to offset the ballooning debt.

More Articles on Healthcare Spending:

SGR Alternatives Considered, But Cost of Repeal is the "Elephant in the Room"

Report: Medicare, Medicaid Spending Driven by Enrollment, Not Costs

GAO: Budget Control Act Did Not Solve Long-Term Healthcare Costs

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