CBO Predicts Spiraling Costs For Medicare and Medicaid

Washington

Federal costs for Medicare and Medicaid could spiral to more than 21 percent of the gross domestic product by 2050, according to a recent Congressional Budget Office long-term budget forecast. In 2003, Medicare and Medicaid spending equaled only 3.9 percent of the nation’s GDP.

“As health care costs continue to grow faster than the economy and the baby boom generation nears eligibility for Social Security and Medicare, the United States faces inevitable decisions about the fundamentals of its tax and spending policies,” the forecast said. Unless taxation reaches “unprecedented” levels, the forecast continued, “current spending policies will probably be financially unsustainable over the next 50 years.”

The report analyzed the long-term effects of several options to reduce spending, including competition and reducing provider payments. “Costs might be reduced through competition or disease management, but there is currently too little evidence to conclude that such approaches would significantly reduce Medicare’s total cost,” the forecast stated.

Regarding provider payment reductions, “if providers could not charge enough to cover the costs of providing a service, this policy could restrict Medicare patients’ access to care.” To view the complete report, visit www.cbo.gov.

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