Unbiased Analysis of Today's Healthcare Issues

What is causing U.S. debt to explode?

Written By: Jason Shafrin - Apr• 05•17

According to the Congressional Budget Office’s (CBO’s) 2017 Long-Term Budget Outlook, you need to look no further than entitlements for the elderly.

Mandatory programs have accounted for a rising share of the federal government’s noninterest spending over the past few decades, exceeding 60 percent for the past several years. Much of the growth has occurred because Social Security and Medicare—the government’s two largest mandatory programs—provide benefits mainly to people age 65 or older, a group that has been growing significantly. On average, federal outlays for Social Security and Medicare made up almost 40 percent of total noninterest spending during the past 10 years, compared with 16 percent 50 years ago.

In particular, Medicare spending as a share of the economy is expected to almost double over the next 30 years:

Medicare spending, net of offsetting receipts (mostly premiums paid by enrollees), would increase from 3.1 percent of GDP today to 6.1 percent in 2047, and it would account for more than three-quarters of the increase in spending for major health care programs over the next 30 years.

Other health care programs for non-elderly Americans are also contributing to the budget deficit.  Medicaid and the Children’s Health Insurance Program (CHIP) would increase by 50% as a share of the economy.

Spending on Medicaid and CHIP, combined with outlays for the marketplace subsidies and related spending, would rise from 2.4 percent of GDP today to 3.2 percent in 2047.

At the same time, one must recognize that these program provide key benefits for the elderly, indigent, and young.  It is unclear if or how any Republican bill would change these trends.  Nevertheless, the country faces some key challenges in the coming years as baby boomers begin to retire.

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