Increasing the Value of Federal Spending on Health Care

ISource: Peter R. Orszag, CBO Testimony, before the Committee on the Budget, U.S. House of Representatives, July 16, 2008

The rate of growth in health care costs is the most important factor influencing the federal government’s long-term fiscal situation. The Congressional Budget Office (CBO) projects that, without any changes in federal law, total spending on health care will rise from 16 percent of the gross domestic product (GDP) in 2007 to 25 percent in 2025 and 49 percent in 2082, and net federal spending on Medicare and Medicaid will rise from 4 percent of GDP to almost 20 percent over the same period. Many of the other factors that will play a key role in determining future fiscal conditions–including the actuarial deficit in Social Security and a decision about extending the 2001 and 2003 tax legislation past its scheduled expiration in 2010–pale by comparison over the long term with the impact and challenges of containing growth in the cost of federal health insurance programs.
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