Spending Spirals Up As Medicare Turns 39

Washington

On July 30, the day the Medicare program celebrated its 39th birthday since being signed into law in 1965, the White House Office of Management and Budget (OMB) increased its spending estimate for the massive program by more than $67 billion over the next five years. According to the OMB, up to $19 billion of those outlays link directly or indirectly to the Medicare Modernization Act (MMA).

The new estimate is included in the OMB’s “Fiscal Year 2005, Mid-Session Review,” which predicts that the federal budget deficit will be $445 billion in 2005. “The real fiscal danger is uncontrolled growth in major entitlement programs,” the report said, noting that Medicare and Medicaid pose “severe budgetary challenges in the decades ahead in the absence of policy action.” The report predicted that the government will spend $290.4 billion on Medicare in fiscal 2005 and $345.2 billion in fiscal 2006 as the MMA’s prescription drug benefit rolls out.

“Those who claim the new [Medicare] benefits are inadequate have to face reality,” said Senate Finance Committee Chairman Chuck Grassley, R-Iowa, in a statement noting the program’s birthday. “There is no bottomless source of cash for Medicare benefits … While Medicare benefits should be generous, they also have to be sustainable and affordable for beneficiaries.”

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