Source: Congressional Budget Office: According to projections by the Congressional Budget Office (CBO), federal spending on Medicare and Medicaid will grow from 4 percent of gross domestic product (GDP) in 2007 to 9 percent in 2032 and 19 percent in 2082. Spending growth will depend on two factors: trends in the cost of health care and the aging of the population. If health care costs per beneficiary grew at the same rate as per capita GDP and the age distribution of the population did not change, Medicare and Medicaid spending would remain a constant share of the economy. In reality, however, health care costs per beneficiary will grow more quickly than per capita GDP and the population will age.”
Although many futurists say aging is the major cause of future growth in federal spending in Medicare and Medicaid, most of the increase that CBO projects will result from rising costs per Mediare/Medicaid beneficiary rather than rising numbers of beneficiaries. The effect of an aging population is smaller but still accounts for substantial spending growth. Those two factors also interact with each other: The rapid growth of health care costs is a more important factor when the population is aging over time; conversely, population aging looms larger when health care costs are rising over time.
Understanding the relative contributions of those two factors to the growth in federal spending on Medicare and Medicaid is important. The aging of the population, which has a smaller impact on spending growth, cannot be easily influenced by policy changes, but efforts can be made to stem the rising costs per beneficiary relative to per capita GDP—by far the larger factor in spending growth in the two programs. (according to the CBO)
More than half of the growth in federal spending on Medicare and Medicaid is attributable to health care costs per person growing more rapidly than per capita GDP. Depending on the approach used, by 2082 between 53 percent and 60 percent of the accumulated growth is attributable solely to per capita cost growth, between 14 percent and 17 percent is attributable solely to aging, and the remainder (between 26 percent and 32 percent) is attributable to the interaction of those two factors as costs grow and the population ages at the same time.
Over the next 25 years, aging will be relatively more important than it will be over the longer term, accounting for between 27 percent and 35 percent of projected growth by 2032, as the baby-boom generation ages and expands the number of Medicare and Medicaid beneficiaries.
CBO estimates more than half of the growth in spending will result from cost growth.
This is why we have to do a better job in health care. And it’s not just about costs, though that will affect all of us. It is about quality of care along with understanding that prevention and independence are imperative for all human beings. As one ages, one needs health care professionals that understand the nuances the aging body and mind have and how this can influence outcomes. I try not to tout what we do at Erickson Health but I believe in what we do and the evidence in our increasingly positive outcomes, and reduced costs, speak for themselves. You can download our white paper on how we manage this at http://www.politicsofprevention.com.
Its not rocket science. It’s a common sense, person centered approach and it works. It needs to catch on. We need to be adamant about reducing bureaucracy and pontification and make this happen for all of us.
