CBO: Medicare and Medicaid spending growth unsustainable

Federal expenditures on the two programs could rise from 4% of the U.S. economy in 2007 to 18.5% in 2082 -- unless systemic changes are made.

By Doug Trapp, AMNews staff. Dec. 3, 2007.

Washington -- Medicare and Medicaid spending would -- if unaddressed -- continue to grow faster than the economy over the next 75 years, but don't blame it all on the baby boomers. Instead, look at the way physicians and hospitals are paid and how technology and new treatments drive costs, according to a first-ever Congressional Budget Office analysis of long-term health spending.

"The main message of this study is that, without changes in federal law, federal spending on Medicare and Medicaid is on a path that cannot be sustained," stated the report, released Nov. 13.

CBO Director Peter Orszag, PhD, said other Medicare and Medicaid spending predictions have overemphasized the effect of the aging American population, including the baby boomers.

"That fact that our population is getting older does affect the federal budget and is a factor in our overall long-term fiscal problem. However, it is not by any means the main factor," Dr. Orszag said. Other factors, such as new technology, play a larger role.

In 2030, federal Medicare and Medicaid spending will consume about 8% of the gross domestic product, a measure of the total value of goods and services produced in the U.S., the report predicts. Of that, 0.8 percentage points would be from the effect of aging. By 2082, federal Medicare and Medicaid spending would eat up 18.5% of the gross domestic product, with the effect of aging representing just 1.7 percentage points.

Dr. Orszag emphasized that CBO estimates are not an attempt to predict the future but are a picture of what would happen if the health system isn't reformed. With that in mind, the CBO report estimates by 2082 overall health spending would equal 49% of the gross domestic product.