The Remington Report

Spending on Medicare, Medicaid, and Social Security will increasingly strain the federal budget through 2020, according to the Congressional Budget Office (CBO). In a report released, the CBO projects outlays for Medicare and Medicaid (excluding funding provided by the 2009 stimulus legislation) to increase at an average rate of about 7 percent per year between 2011 and 2020.

Under current law, federal healthcare costs are likely to keep growing faster than the gross domestic product (GDP), as they have for the past 40 years. In addition, the population age 65 and older will continue to expand rapidly, causing the growth of spending for Medicare, Medicaid, and Social Security to speed up from its already rapid rate. The CBO estimates that those three programs will account for about 70 percent of mandatory spending (excluding offsetting receipts) in 2010. By 2020, the proportion of outlays for those three programs will reach 80 percent of mandatory spending under current law. To keep annual deficits and total federal debt from reaching levels that would substantially harm the economy, lawmakers would have to increase revenues significantly as a percentage of GDP, decrease projected spending sharply, or enact some combination of the two.

The CBO projects that Medicare spending will reach $528 billion in 2010, $574 billion in 2011, $830 billion in 2017 (the year the Medicare Trust Fund is projected to become insolvent), and a whopping $1,038 billion in 2020. The CBO projects Medicaid spending will reach $280 billion in 2010, $268 billion in 2011, $371 billion in 2017, and $458 billion in 2020.

In general, the CBO projects that if current laws and policies remain unchanged, the federal budget would show a deficit of about $1.3 trillion for FY10 (9.2 percent of GDP), compared with a shortfall of ($1.4 trillion in FY09 (9.9 percent of GDP). The 2009 deficit was the largest as a share of GDP since the end of World War II.