Medicare, Medicaid Costs Still Expected to Double Despite Revised CBO Projections

A March budget report from the Congressional Budget Office shows that Medicare and Medicaid costs are still expected to more than double between fiscal year 2012 and FY 2022.

The budget projections, which the CBO updated from its January baseline budget projections, found similar trends in Medicare and Medicaid spending. In FY 2012, Medicare spending is expected to stand at $575.7 billion and will jump to more than $1.058 trillion in FY 2022 due to the increased aging of the country's population. Net outlays are expected to be a much lower 1.3 percent next year, but they are expected to jump to 10.7 percent by 2022, according to the report.

Medicaid costs are projected to increase by even more, due in part to the Patient Protection and Affordable Care Act's expansion of Medicaid. Medicaid spending in FY 2012 is expected to be around $258 billion, and by FY 2022, that figure will jump to more than $622 billion.

However, the CBO found Medicare would save $107 billion under Part D, which reflects an increase in the number of high-volume drugs with generic substitutes now available. Additionally, the CBO readjusted its spending estimates for the insurance provisions of the PPACA and found it would cost $50 billion less over the next 10 years.

The CBO's current estimate of the national budget deficit for FY 2012 is $1.17 trillion, a $93 billion increase from January. From 2013 to 2022, the cumulative deficit is expected to be $2.89 trillion, which is actually $186 billion less than projected in January due in part to recent or scheduled tax provisions.

However, the CBO offered an "alternative fiscal scenario" that incorporates several possible assumptions regarding the country's fiscal policies: If expiring tax provisions are extended, the Medicare sustainable growth rate for physician payments is not permanently fixed and sequestration cuts do not occur (among other scenarios), then the national deficit from 2013 to 2022 would skyrocket to $10.73 trillion.

"Although the deficit is starting to shrink, it remains very large by historical standards," CBO officials wrote. "How much and how quickly it declines will depend in part on how well the economy performs over the next few years. Probably more critical, though, will be the fiscal policy choices made by lawmakers as they face the substantial changes to tax and spending policies that are slated to take effect within the next year under current law."

More Articles on Healthcare Spending:

Hospital Spending in 4Q Rises 3.5% From 3Q

How Slowly is Medicare Spending Growing?

CBO: Federal Healthcare Expenses Set to Double Over Next Decade

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