In January, the CBO released a report titled The Budget and Economic Outlook: Fiscal Years 2010 to 2020. A summary of the findings is available on the CBO Director’s blog. Today, however, I focus on CBO’s evaluation of how changes in health care spending affect the federal budget.
Why did Medicare outlays increase at higher than historical averages? It is possible that physicians are cost shifting in the face of a bad economy. With more unemployed workers (and thus fewer privately insured individuals), more physicians may be willing to see Medicare patients or physicians may use supplier induced demand to increase the number of services they supply to this population. On the other hand, this could simply be explained by the fact as baby boomers retire, there are more Medicare-eligible individuals which will increase cost even if spending per capita increases at historical rates.
Additional large spending outlays last year include the American Recovery and Reinvestment Act of 2009 (ARRA) ($80 billion)–which was largest annual adjustment since 1982–and military operations in Iraq and Afghanistan ($155 billion).
In the long term, the CBO projects that debt levels will continue to rise:
The most important point the CBO makes in the report, however, is the following:
Source: Congressional Budget Office, “The Budget and Economic Outlook: Fiscal Years 2010 to 2020,” January, 2010.