The rate at which US health care costs grow in relation to national income will be the most important determinant of future budget spending and, if health expenditures continue at their current rate, future budget deficits will become unsustainable, US legislators have been warned.
For decades, spending on the federal Medicare and Medicaid health programmes has been growing faster than the US economy, says the Congressional Budget Office (CBO) and, under current law, it has projected that spending on the two programs measured as a share of Gross Domestic Product will rise from 4% now to 12% in 2050 and 19% in 2082, CBO director Peter Orszag told a hearing of the US House Committee on the Budget late last week. As a share of the economy, that would be roughly equivalent to the total amount that the federal government is spending today, he added.
Moreover, the bulk of this projected increase in health spending reflects increased costs per beneficiary, rather than higher numbers of beneficiaries associated with an aging population, Mr Orszag told the hearing, which was held to discuss the long-term budget outlook.
While efforts to reduce overall government spending will require “potentially painful” actions to slow the rise of health care costs, he suggested there could be ways of doing so “without harming the health of Medicare and Medicaid beneficiaries.” Making such changes will be difficult, but opportunities exist to constrain costs without incurring adverse consequences for health outcomes, “and even perhaps to simultaneously reduce cost growth and improve health,” he said.
Mr Orszag warned the legislators that delays by government in taking action to resolve these expected budgetary imbalances would: cause the amount of government debt to rise; increase the chance that policy changes would occur suddenly, thus creating difficulties for individuals and households; and raise the cost of interest on the federal debt, so that lawmakers would have to make ever-larger changes in policy to finance those additional costs.
“So, a central challenge will be to restrain the growth of costs without harming the incentives to provide appropriate care and development valuable new health treatments,” said Mr Orszag, but he emphasised that moving the nation toward that possibility is essential to moving the USA toward a sounder long-term fiscal footing.
The House Budget Committee chairman, Democrat John Spratt, said the CBO’s report needed to be interpreted “with some caution.” Nevertheless, he added that it “confirms what we know, which is that we face a serious long-term budget challenge, driven in no small part by growing health care costs.. There is a growing consensus that making Medicare and Medicaid sustainable over the long run requires that we deal with the larger forces causing inefficiency and excess cost growth in health care overall. As we learn how to get better value for our health care dollar, we must apply those lessons to the public as well as the private sector,” said Rep Spratt.
