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CBO's latest budget forecast finds growth of healthcare spending still rising slowly


By: 
Stephanie Bouchard

The growth rate of healthcare spending has continued to be slow reported the Congressional Budget Office Tuesday, but the rising cost of healthcare is still a threat to the country’s future economic well being.

In its latest budget and economic outlook, the CBO reported that net outlays for Medicare in fiscal year 2012 grew by 3 percent – or $16 billion – a slower growth rate than any recorded since 2000. The CBO estimates that in 2013, the slow growth will continue, with Medicare net outlays increasing by 4 percent, or $21 billion.

“Health spending has grown slowly over the past few years both in federal programs and in the rest of the healthcare system,” said Douglas Elmendorf, director of the CBO, during a press briefing broadcast live on C-SPAN Radio. “We think that part of that owes to the recession and the loss of income and wealth, but we think a significant part of that probably does not stem from the recession, probably arises from structural changes in the healthcare system.

“The critical question is whether those structural changes are very transitory changes or whether they will persist.”

Elmendorf said  the CBO is currently analyzing the slow growth in healthcare but that it doesn’t know how long the slow growth will continue.

“I think it may be worth emphasizing here that despite the slowing in growth, we still see substantial growth in federal healthcare spending over the coming 10 years and beyond. That is, importantly, because the number of people who will be eligible for Medicare will be rising very sharply.”

In the CBO’s baseline projections for the 2013-2022 period, total federal spending will continue to rise for a few years, but will be held in check by the strengthening economy and provisions of the Budget Control Act. However, by 2017, the aging population, increasing healthcare costs, and an expansion of eligibility for federal subsidies for health insurance will “substantially boost spending” for Social Security and the major health programs.

Budgetary outcomes also depend on whether or not policy makers will stick to current law or if they will, as they have in the past, extend particular policies, such as preventing the Medicare payment cut to doctors. In such a scenario, debt held by the public would rise to 87 percent of GDP rather than the 77 percent projected by the CBO under current law.

“I think what our report does show is that we have a large budget imbalance. We have large projected deficits, a debt that will remain at a historically high share of GDP and will be rising at the end of the coming decade,” said Elmendorf. “I think what that implies is that small changes in budget policy will not be sufficient to put the budget on a sustainable path.”

“I think part of the point here,” he concluded, “is that we are confronting now in our country changes of the sort that we have not had to make in the past.”

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