Federal Health Care Spending Is a $425 TRILLION Problem

The release of CBO’s long-term budget outlook yesterday was accompanied by a supplemental series of spreadsheets that serve as the basis for the graphs in the report.  Among the interesting data points are estimates of total mandatory health care spending – including Medicare, Medicaid, SCHIP, and the insurance subsidies created in the health care law – under the alternative fiscal scenario.  This scenario assumes that Medicare physician payments are not reduced by nearly 30 percent next year under the sustainable growth rate mechanism, and that several savings provisions in the health care law that CBO believes will be “difficult to sustain for a long period” – such as the productivity adjustments for providers and IPAB spending reductions – are not fully implemented. (Unfortunately, CBO does NOT provide separate programmatic assumptions for Medicare and/or Medicaid spending under the alternative fiscal scenario, so it’s impossible to calculate these – or to calculate the long-term spending effects of the health care law in isolation from other provisions.)

The spending levels in the charts are expressed as a percentage of GDP.  However, CBO also includes yearly GDP estimates in calculating its long-range economic assumptions.  So it’s fairly simple to multiply estimated federal health care spending as a percentage of GDP by estimated GDP amounts in dollars and arrive at a dollar-figure estimate of federal health care spending for each year through 2085.

The results are below – and they’re shocking.  Between now and 2085, CBO projects that the federal government will spend $425,959,000,000,000 on health care programs.  That’s $425 TRILLION dollars.  And as CBO points out in its chart, those estimates are in today’s money.

Even in the shorter term, spending on health care entitlements will grow at astounding levels.  Between now and 2035, CBO projects that federal spending on health care will total $41.3 trillion.  By comparison, according to the International Monetary Fund, the combined gross domestic product of the world’s top ten economies in 2010 was $41.4 trillion.  So in other words, over the next generation, the United States will spend on its health care entitlements about as much as all the goods and services that the United States, China, Japan, Germany, France, the United Kingdom, Brazil, Italy, Canada, and India combined produced last year.

If ever any set of statistics could convince you that Washington doesn’t have a taxing problem, it has a spending problem, it’s this one.

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