Federal Spending on Health Care Doubles in the Next Decade

The Congressional Budget Office (CBO) released its Budget and Economic Outlook for years 2012 to 2022 yesterday, and as Heritage’s Patrick Knudsen shows, the numbers add up to a dismal fiscal future. As the government continues its fiscal irresponsibility, 2012 will be the fourth straight year of trillion-dollar deficits. This trend is on track to continue as a result of increasing federal spending on health care, which will more than double between 2012 and 2022.

The CBO estimates that by 2022, the government will spend $1.8 trillion on health care, 7.3 percent of our total economy. CBO breaks down the portions of the spending each program will account for: “Rising spending for Medicare accounts for about one-half of that growth, rising spending for Medicaid accounts for roughly one-third, and the remaining growth stems primarily from the new subsidies to be provided through health insurance exchanges beginning in 2014.”

Medicare Spending

As the population ages and health care costs continue their upward trend, Medicare spending will become unsustainable. CBO projects that “gross Medicare outlays in 2022 will exceed $1 trillion, almost 90 percent more than they are expected to be this year.” But that projection includes cuts to Medicare reimbursements for doctors and hospitals included in current law that are highly unlikely to happen. For example, doctor payment reductions are scheduled to be cut by 27 percent under the flawed sustainable growth rate (SGR). This affects the CBO’s baseline greatly:

If future legislation overrides the scheduled reductions (as has happened in every year since 2003), spending on Medicare might be significantly greater than the amount that is projected in CBO’s baseline. For example, if payment rates for physicians remained at their 2011 amounts through 2022, net Medicare outlays over the next 10 years would be about $316 billion (or roughly 4 percent) higher than in CBO’s baseline projections.

Growth in Medicare spending is partially a result of an increase in the number of beneficiaries of 3 percent per year over the next decade, from 48 million beneficiaries in 2011 to 66 million beneficiaries in 2022. In addition, federal spending per beneficiary will grow. Spending in Parts A and B is projected to increase by about 30 percent, and Part D spending is expected to double.

Medicaid Spending

Federal spending on Medicaid is expected to “shoot up rapidly in 2014, 2015, and 2016 as a result of provisions in the Affordable Care Act. By 2022, under current law, federal outlays for Medicaid are expected to total $605 billion, more than twice the 2012 amount.” And this is only the federal share of Medicaid spending; state spending will also increase. Spending growth is caused by a huge increase in enrollment due under Obamacare’s expansion of the entitlement. “By 2022, about 95 million people will be enrolled in Medicaid at some point in the year,” CBO estimates. The federal share of Medicaid costs will be significantly larger in the future than it is today.

Obamacare Subsidies

Obamacare’s major provisions begin to kick in in 2014, and this will result in federal spending for health care programs other than Medicare and Medicaid rising from $26 billion this year to $161 billion in 2022. CBO predicts, “About 8 million people will receive exchange subsidies in 2014 and roughly 20 million will receive them by 2022. Outlays for providing those subsidies, operating the exchanges, and running related programs will total $104 billion by 2022.”

End It Before It Gets Worse

As expected, the CBO’s report does not show Obamacare paying for itself. In fact, it costs $54 billion more over the next 10 years than the last CBO estimate. This is because the Administration’s abandoned CLASS Act, which had a repeal vote in the House happening today, no longer offsets new spending. Also, the cost of the law increased because an additional year of its full implementation has been added to the 10-year baseline. The CBO’s estimates are going to continue to rise as the baseline captures a full 10 years of implementation.

CBO’s budget and economic outlook for America is bleak and disturbing. It reiterates the need for Congress to get serious about our nation’s debt and spending problems. It is past time to repeal Obamacare and get the country’s fiscal future back on track. To read Heritage’s full reform proposal, click here.

Source material can be found at this site.

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