The Congressional Budget Office has released its 2011 Long Term Budget Outlook, predicting significant increases in health care spending for Medicare and Medicaid as well as increases in social security costs, creating a “daunting” budget outlook for the coming decade and beyond.
If current laws remain in place spending on the major health programs, including Medicare and Medicaid, would increase from less than 6 percent of GDP to around 9 percent of our nation’s GDP in 2035.CBO attributes this change to both the aging population and general health care cost increases, including major advances in medicine that produce costly new drugs, equipment and skills. These general health care cost increases have been raising the price per enrollee for decades. Between 1985 to 2010, gross federal spending for Medicare more than doubled from 1.7 percent to 3.6 percent and Medicaid spending more than tripled from .5 percent to 1.9 percent of GDP.
Social Security will also face financial troubles. The federal government currently spends more on Social Security than it does on any other single program, and will likely spend 733 billion dollars in 2011, or one-fifth of all federal spending. With the baby boomers retiring, 97 million people will collect benefits in 2035, which is nearly double the 56 million Americans collecting Social Security today. Without changes to the program, the CBO expects program costs to rise from 4.8 percent of GDP today to 6.1 percent by 2035.
Although the report indicates that these estimates are far from certain, the writers warn that big changes must be made to counter their findings. “The retirement of the baby-boom generation portends a significant and sustained increase in the share of the population receiving benefits from Social Security, Medicare, and Medicaid,” reads the report. “Without significant changes in government policy, those factors will boost federal outlays sharply relative to GDP in coming decades under any plausible assumptions about future trends in the economy, demographics, and health care costs.”
