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CBO Budget Report Shows Impact of Healthcare Costs and Aging
Population
Healthcare
Finance News Staff
February 01, 2012
The aging of the country’s population and the rise in healthcare costs
will continue to be the nation’s biggest economic challenge concluded
the Congressional Budget Office’s latest economic outlook, released
Tuesday.
The cost of government healthcare programs will more than double by
2022 with federal spending on Medicare, Medicaid and other healthcare
programs reaching $1.8 trillion – about 7 percent of the entire economy.
“The fundamental fiscal challenge for this decade and beyond remains
the aging of the population and rising costs for healthcare,” said
Douglas Elmendorf, director of the CBO, during a press briefing Tuesday
broadcast live on C-Span.
Under current law – meaning that such things as the cuts required by
the Budget Control Act and the cuts to physicians’ Medicare payments
actually happen – the CBO expects spending on Social Security and
Medicare will rise by about 2 percent this year to $2.1 trillion or
13.3 percent of gross domestic product (GDP) and it will remain nearly
the same for 2013, but thereafter, the CBO expects an increase of about
6 percent per year to reach $3.5 trillion by 2022.
Elmendorf said that the CBO would have more data about the federal
healthcare plans in its March forecast. “Although this outlook is the
one that gets the most attention in the year, in fact we get more of
the data we use for updating the health projections between now and the
March baseline,” he said. The March projections should also include
projections of the effects of the Affordable Care Act (ACA) on the
federal healthcare plans.
Of the healthcare plans data the current projections did examine, the
CBO noted that there is very slow growth in Medicare spending per
beneficiary in the next decade due to the sustainable growth rate (SGR)
cut to physicians’ Medicare payments, additional restraint imposed by
the ACA and a Medicare population that is expected to get younger as
more beneficiaries join at age 65 needing less expensive care.
Under the CBO’s current law baseline there are potential savings in
Oversees Contingency Operations (OCO) that could be used to pay for the
repeal of the SGR, as many medical societies have been proposing.
Whether those are “true savings,” said Elmendorf, depends on the need
to fund unforeseen military action.
The CBO estimated the country’s projected deficit for 2012 will be
$1.079 trillion, about 2 percent below last year’s deficit but still
higher than any deficit between 1947 and 2008. The deficit will
continue to drop over the next decade if current law remains in effect.
The CBO offered an alternative scenario if recent policies rather than
current law reign. Under the CBO’s alternative fiscal scenario – in
which expiring tax provisions (not including the payroll tax reduction)
are extended, the cut to physicians’ Medicare payments is kept at its
current level, the alternative minimum tax is indexed for inflation
after 2011 and the reductions mandated by the Budget Control Act do not
happen – deficits would average 5.4 percent of the GDP over the
2013-2022 period rather than the current law projection of 1.5 percent
and public debt would reach 94 percent of GDP.
“There is no plausible economic outcome under which the policies of the
alternative fiscal scenario … would lead to a sustainable budget
outcome,” Elmendorf said. “… changing current laws to let current
policies continue along the lines of the alternative scenario we’ve
outlined would boost the economy and allow people to pay less in taxes
and benefit more from government programs in the next few years but
would put the nation on an unsustainable fiscal course.”
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