CBO Says Even with a Slower rate of Growth, Public Health Assistance Programs Are REALLY Expensive

Medicare Spending Low because of Economy, Not becuase of Medicare Cuts

The Congressional Budget Office released its updated economic forecasts last week, and in addition to containing some pretty grim news about the overall state of the economy, it also made some predictions about the overall cost and status of government spending on public health programs such as Medicare and Medicaid.  Bottom line, while the general rate of public health spending has slowed recently, public health assistance programs are still expensive. Moreover, in the next 10 years the price will only increase.

The CBO did reduce projected Medicare spending by $169 billion via a “technical adjustment to reflect the current slowdown in health spending.” But most economists commenting on the report, including Medicare’s own actuary, attribute the decline in spending to general economic malaise. They note, if and when the economy picks up, so will rates of spending as people seek out delayed health care services. CBO Director Doug Elmendorf seemed to at least partially agree, commenting  in a press conference, “Presumably, the weak state of the economy is a factor, but given the magnitude of the slowdown in national health spending and the timing of that slowdown, which seems to have started before the recession, we and most analysts think there are probably structural factors at work as well.”

CBO also said Medicaid spending would decrease by $325 billion, or 7 percent, from 2013 to 2022. However, the bulk of that reduction is due to the Supreme Court’s ruling on PPACA and CBO’s assumption that some states will choose not to expand their programs. The savings do not  stem from any improvements to Medicaid that would make the program overall less costly.

Meanwhile, according to the forecast, in 2022 the federal Government will spend a total of $1.064 trillion on Medicare, and $592 billion on Medicaid (not counting the state share of Medicaid payments). Furthermore, the CBO said that the economy could return to a recession in 2013 if policymakers do not come up with a solution to the so called “fiscal cliff” scheduled to occur on January 1, 2013 and continue to run up high federal budget deficits. Comprehensive entitlement reform, anyone?

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