CBO: Medicare Spending To Reach $1 Trillion By 2022

Outlays for Medicare, Medicaid and “other mandatory federal programs related to health care accounted for just under 40 percent of mandatory spending in 2011,” the Congressional Budget Office reported today and will continue to grow into the future. For instance, a boost in the number of beneficiaries will increase Medicare spending to more than $1 trillion by 2022, reflecting 4.2 percent of the Gross Domestic Product, (GDP) and raise Medicaid spending to $605 billion:

Interestingly, the growth in Medicare spending per beneficiary over the 2012–2022 period will only average “1 percent a year more than the rate of inflation” — compared to a 5 percent a year growth between 1985 and 2007 — as a result of “the anticipated influx of younger, healthier beneficiaries” and the constraining effects of the SGR formula and the limits on updates to payment rates for other services,” the CBO projects. Per-beneficiary spending will increase thereafter as a result of “rising drug costs” and “more generous benefits enacted in the Affordable Care Act.” Outlays will increase if Congress patches the Sustainable Growth Rate (SGR) and prevents a scheduled 27 percent fee reduction for Medicare doctors in March 2012, as lawmakers have pledged to do. “If payment rates stay as they are now through 2022, outlays for Medicare (net of premiums) would be $9 billion higher in 2012 and about $316 billion (or about 5 percent) higher between 2013 and 2022,” CBO concludes.


Expenditures on Medicaid, on the other hand, will decrease in 2012 “as states become responsible for a higher share of total costs than had been the case in recent years.” The program grow steadily between 2014 an 2016, when more lower-income Americans become eligible for Medicaid under health care reform. By 2022, about “95 million people will be enrolled in Medicaid at some point in the year, CBO estimates.”